Gossip on Stock Return: Evidence from China

Chang Yu

doi:10.54691/bcpbm.v21i.1175

Authors

Chang Yu

DOI:

https://doi.org/10.54691/bcpbm.v21i.1175

Keywords:

Investor attention theory, Gossip, Stock return, Price drift, Investor behavior

Abstract

Based on the investor attention theory, non-fundamental related information could lead to influences on the stock market as well. This study is aiming to detect the possible effect from gossip on stock return. By focusing on the specific information’s impact on the company’s stock return, it takes a Chinese company JD as the research objective and the gossip news about the company’s CEO as the information source. The investor attention is measured by Google searching volume index. The results from the empirical tests show that the gossip does have significant effects on stock return during a short period. For the longer period, the effects are likely to become insignificant and eliminated themselves. The reason for the stock price drift is related to the increased investor attention by link the Google searching index and the price fluctuation together. Based on the situation from the year of 2015 to 2016 of JD Company, the empirical research shows robust support for the argument.

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