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News and return volatility of Chinese bank stocks

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  • Ho, Kin-Yip
  • Shi, Yanlin
  • Zhang, Zhaoyong

Abstract

Using the comprehensive RavenPack Dow Jones News Analytics (DJNA) database that captures firm-specific news releases and their sentiment scores at high frequencies, we examine the contemporaneous correlation as well as the lead-lag relation between news and return volatility of major commercial banks listed on the Chinese stock market. Contrary to the Sequential Information Arrival Hypothesis (SIAH), most of the Chinese bank stocks do not exhibit significant lead-lag relations between news and volatility. However, there is substantial evidence that news is strongly correlated with return volatility in all the stocks, consistent with the Mixture of Distributions Hypothesis (MDH). Further analysis based on news sentiment scores suggests that positive news arrivals influence return volatility more strongly, compared with negative news. In addition, there is some evidence indicating that news arrivals contribute to the persistence in return volatility.

Suggested Citation

  • Ho, Kin-Yip & Shi, Yanlin & Zhang, Zhaoyong, 2020. "News and return volatility of Chinese bank stocks," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 1095-1105.
    • Handle: RePEc:eee:reveco:v:69:y:2020:i:c:p:1095-1105
    DOI: 10.1016/j.iref.2018.12.003
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    More about this item

    Keywords

    Chinese stock markets; News sentiment; Stock return volatility; Lead-lag relations;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East

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