Intra-Industry Information Diffusion In China Stock Market
Loading...
Date
2016-06
Authors
Dong Chi
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
Under the assumption of Efficient Market Hypothesis (EMH), stock prices
completely reflect all commonly available information. Consequently, information
instantly diffuses in a complete and frictionless market. However, a few frictions
usually appear on the process of information diffusion in real financial market.
Information diffusion might be affected by various kinds of factors. Concentrating on
intra-industry, the central focus of the study is the systematic investigation of
information diffusion in China stock market. The panel and conditional vector
auto-regression procedures are employed to detect the intra-industry information
diffusion. This study uses 1175 companies from seven industries for the period of
2002 to 2013. Based on seven sample industries, including time-series data and panel
data investigations, the study explores the impacts of internal and external
determinants on the intra-industry information diffusion in China stock market. The
study discovers the internal determinants of intra-industry information diffusion,
namely firm size, trading volume and book/market (BM) ratio, to have an effect on
the process of information diffusion. Big firms and high trading volume firms as well
as high BM ratio firms usually have faster speed of intra-industry information
diffusion in China stock market. Meanwhile, as the external determinant of
information diffusion, the market conditions also could affect the process of
intra-industry information diffusion. Regardless of shorter and longer horizons of
market condition, the results display there are more obstacles in the process of
intra-industry information diffusion when the market falls off. The results further
suggest the speed of intra-industry information diffusion in down market becomes
slower than that in up market. On the contrary, when the market is turning upward,
the speed of intra-industry information diffusion turns faster. Furthermore, the study
also discovers policy change, as another external determinant, could influence the
process of intra-industry information diffusion in China stock market. Specifically,
policy changes in China stock market are found to impede the process of
intra-industry information diffusion. Along with policy changes of China stock
market, the speed of intra-industry information diffusion between big and small
stocks declines. Therefore, policy changes in China stock market seem ineffective to
some degree. However, continuously decreasing information volatility of
intra-industry information diffusion is also noticeable in China stock market. The
results imply policy changes are useful from other aspect.
Description
Keywords
The systematic investigation of information diffusion , in China stock market.