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News shock, limited institutional attention and stock market response: Evidence from China

Author

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  • Chen, Shaoling
  • Wu, Jun
  • Liang, Weijuan
  • Yang, Haisheng

Abstract

This study explores the Chinese stock market’s response to news shocks. The results show that: (1) the stock market tends to overreact to positive news shocks but underreacts to negative news; (2) institutional investors pay over-attention to positive news shocks but insufficient attention to negative news shocks, which causes the asymmetric response patterns of the stock market directly; (3) the inclination and the distraction of attention suggest that the limited attention constrains the institutional investors; (3) the impact of institutional investors’ limited attention on asymmetric reactions increases with the individual limited attention, margin buying, and informed trading of institutional investors.

Suggested Citation

  • Chen, Shaoling & Wu, Jun & Liang, Weijuan & Yang, Haisheng, 2025. "News shock, limited institutional attention and stock market response: Evidence from China," Journal of Asian Economics, Elsevier, vol. 100(C).
    • Handle: RePEc:eee:asieco:v:100:y:2025:i:c:s1049007825001174
    DOI: 10.1016/j.asieco.2025.101993
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    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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