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

75 Pages Posted: 9 Aug 2022

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 impact of financial knowledge on stock pricing efficiency. We created an investor education website and conducted a field experiment by providing knowledge about the pricing implications of accounting accruals to investors in randomized stock groups via social media platforms in both China and the U.S. We find that treatment stocks experience a reduction in accrual mispricing relative to control stocks. This effect is strengthened among stocks with investors who are less sophisticated. Finally, we document a real effect of financial knowledge on firms. Treatment firms experience a decline in discretionary accruals in the post-experiment period.

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
104
Abstract Views
379
Rank
385,566
PlumX Metrics