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Policy signaling and stock price synchronicity: Evidence from China

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  • Hou, Xiaohui
  • Yang, Rui

Abstract

We investigate whether stock price synchronicity is associated with province-level policy support signaling in the case of China. China provides a unique opportunity to investigate the impacts of varied policy signaling across provinces within one national environment. We show that stock price synchronicity is higher for firms in provinces with explicit policy support signaling. Furthermore, more intensive policy support signaling results in increasing stock price synchronicity. Additional robustness tests and mechanism analyses also confirm our empirical results. Our conclusions convincingly show that province-level policy signaling is an important external information source that is valued by China’s investors.

Suggested Citation

  • Hou, Xiaohui & Yang, Rui, 2021. "Policy signaling and stock price synchronicity: Evidence from China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:intfin:v:75:y:2021:i:c:s1042443121000743
    DOI: 10.1016/j.intfin.2021.101355
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    More about this item

    Keywords

    Policy signaling; Stock price synchronicity; Text mining; China;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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