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Baidu news information flow and return volatility: Evidence for the Sequential Information Arrival Hypothesis

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  • Shen, Dehua
  • Li, Xiao
  • Zhang, Wei

Abstract

This paper employs Baidu News as the proxy for information flow and investigates competing hypotheses on the relationships between information flow and return volatility in Chinese stock market. The empirical results show that: (1) trading volume and return volatility are not driven by the same variable, i.e., the information flow, and thus contradicts the predication of the Mixture of Distribution Hypothesis (MDH); (2) there exist significant lead-lag relationships between information flow and return volatility, which is in accordance with the Sequential Information Arrival Hypothesis (SIAH); (3) these findings are robust to alternative measurement of return volatility and subsample analysis. Generally speaking, these findings contradict the prediction of MDH and support the SIAH.

Suggested Citation

  • Shen, Dehua & Li, Xiao & Zhang, Wei, 2018. "Baidu news information flow and return volatility: Evidence for the Sequential Information Arrival Hypothesis," Economic Modelling, Elsevier, vol. 69(C), pages 127-133.
    • Handle: RePEc:eee:ecmode:v:69:y:2018:i:c:p:127-133
    DOI: 10.1016/j.econmod.2017.09.012
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    More about this item

    Keywords

    Return volatility; Sequential Information Arrival Hypothesis; Mixture of Distribution Hypothesis; Information flow; Baidu News;
    All these keywords.

    JEL classification:

    • 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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