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Does the U.S.-China trade war stop? A novel event study on fake news and stock price in China

Author

Listed:
  • Zhong, Zhiyuan
  • Wu, Qiang
  • Wang, Manling

Abstract

This study leverages the unique fake news event on the U.S.-China trade war, and adopts the difference-in-differences framework to identify its two-stage effect on stock prices in China. Our results reveal that the spread of fake news, proclaiming the end of the trade war, caused stock prices of high-tech companies to soar. After it was clarified, prices gradually decreased until the end of the first stage. But in the second stage, the stock prices of these companies grew higher than their counterparts, caused by speculation beliefs. The two-stage effect was more pronounced for the high-tech companies on the Entity List.

Suggested Citation

  • Zhong, Zhiyuan & Wu, Qiang & Wang, Manling, 2024. "Does the U.S.-China trade war stop? A novel event study on fake news and stock price in China," Finance Research Letters, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:finlet:v:66:y:2024:i:c:s1544612324007323
    DOI: 10.1016/j.frl.2024.105702
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    References listed on IDEAS

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    1. Liu, Hongqi & Peng, Cameron & Wei, Xiong & Wei, Xiong, 2022. "Taming the bias zoo," LSE Research Online Documents on Economics 109301, London School of Economics and Political Science, LSE Library.
    2. Shi, Yujie & Wang, Liming & Ke, Jian, 2021. "Does the US-China trade war affect co-movements between US and Chinese stock markets?," Research in International Business and Finance, Elsevier, vol. 58(C).
    3. Shimon Kogan & Tobias J Moskowitz & Marina Niessner, 2023. "Social Media and Financial News Manipulation," Review of Finance, European Finance Association, vol. 27(4), pages 1229-1268.
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    Citations

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    Cited by:

    1. Meneses, Oscar & Menna, Lorenzo & Tobal, Martin, 2025. "Argentina: The honor student—By merit and by mistake. A natural experiment on “information effects”," Journal of International Economics, Elsevier, vol. 158(C).
    2. Louchez, Aniss, 2025. "How fake news effects spread in an oligopolistic market — Evidence from the insulin market," Finance Research Letters, Elsevier, vol. 73(C).
    3. Li, Zeyu & Jiang, Yanyan, 2025. "Strengthening resilience through trade: Development of service trade and enhancing export resilience," Finance Research Letters, Elsevier, vol. 78(C).
    4. Tu, Minghui & Wang, Yuyan, 2025. "Density as defense: Product space relatedness and export resilience during the COVID-19 pandemic," International Review of Economics & Finance, Elsevier, vol. 102(C).
    5. Varela da Costa, João & Bogea Gomes, Silvia & Mira da Silva, Miguel, 2026. "Corporate fake news impacts: A reference model," Technology in Society, Elsevier, vol. 84(C).

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    Keywords

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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