Knowledge is Power: A Field Experiment in the Chinese and US Stock Markets

74 Pages Posted: 9 Aug 2022 Last revised: 13 Oct 2023

See all articles by Wong Sonia

Wong Sonia

Lingnan University - Department of Finance and Insurance; Lingnan University

Yuan Xue

Huazhong University of Science and Technology

Bohui Zhang

The Chinese University of Hong Kong, Shenzhen

Xiaofeng Zhao

Lingnan University - Department of Finance and Insurance

Date Written: August 3, 2022

Abstract

This study examines the causal effect of financial knowledge on stock pricing efficiency. Leveraging a specially designed investor education website, we conduct a field experiment, sharing insights on the pricing of accounting accruals with investors across China and the US on social media. We find that the treatment stocks experience a reduction in accrual mispricing relative to the control stocks. This effect is particularly pronounced when knowledge that enhances the conceptual understanding of accruals is paired with knowledge that aids in the quantitative application of accruals. Furthermore, the treatment effect is strengthened among stocks with investors who engage more deeply with the educational contents yet possess lower financial sophistication.

Keywords: Financial knowledge, accrual mispricing, investor education, field experiment, social media

JEL Classification: G14; G41, G53, C93

Suggested Citation

Sonia, Wong and Xue, Yuan and Zhang, Bohui and Zhao, Xiaofeng, Knowledge is Power: A Field Experiment in the Chinese and US Stock Markets (August 3, 2022). Available at SSRN: https://ssrn.com/abstract=4179996 or http://dx.doi.org/10.2139/ssrn.4179996

Wong Sonia

Lingnan University - Department of Finance and Insurance ( email )

8 Castle Peak Rd
Tuen Mun
Hong Kong

Lingnan University ( email )

Castle Peak Road
Tuen Mun, New Territories
Hong Kong
China

Yuan Xue

Huazhong University of Science and Technology ( email )

1037 Luoyu Rd
Wuhan, Hubei 430074
China

Bohui Zhang (Contact Author)

The Chinese University of Hong Kong, Shenzhen ( email )

Xiaofeng Zhao

Lingnan University - Department of Finance and Insurance ( email )

8 Castle Peak Rd
Tuen Mun
Hong Kong

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