News Tone and Stock Return in Chinese Market

44 Pages Posted: 10 Jan 2022 Last revised: 16 Apr 2023

See all articles by Huimin Ge

Huimin Ge

PBCSF, Tsinghua University; PBCSF, Tsinghua University

Xiaoyan Zhang

Tsinghua University - PBC School of Finance

Date Written: June 21, 2022

Abstract

Using daily news tone data between 2017 and 2020, we examine whether news tones can predict stock returns in Chinese A-share market. We first document that the news tones significantly and positively predict the cross-sectional stock returns over next day and over the next 12-weeks. When we separate the news into online news and paper news, the online news exhibit strong predictive power for future returns, while the printed news only displays marginal predictive power. We hypothesize that the online news is more related to firm fundamentals, while the paper news is more linked to political aspects of firm information. Our results using earnings surprises and SOE subsamples provide supportive evidence for the hypothesis.

Keywords: Media, tone, text-analysis, cross-sectional prediction.

JEL Classification: G10, G11, G12, G14.

Suggested Citation

Ge, Huimin and Zhang, Xiaoyan, News Tone and Stock Return in Chinese Market (June 21, 2022). PBCSF-NIFR Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=4004519 or http://dx.doi.org/10.2139/ssrn.4004519

Huimin Ge (Contact Author)

PBCSF, Tsinghua University ( email )

PBCSF, Tsinghua University ( email )

Xiaoyan Zhang

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

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