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The Chinese News Sentiment around Earnings Announcements

Author

Listed:
  • Yang-Cheng Lu

    (Department of Finance at Ming Chuan University, Taiwan.)

  • Yu-Chen Wei

    (Department of Money and Banking at National Kaohsiung First University of Science and Technology, Taiwan.)

Abstract

We examine the effect of Chinese news on announcement drift and investigate its application to portfolio management, applying a linguistic analysis to extract various dimensions of the information content. Our empirical results reveal a positive (negative) relationship between news sentiment and cumulative abnormal returns in the pre- (post-) earnings announcement period, thereby confirming that the market response takes into consideration all relevant information on the related firm. The application of public news sentiment to portfolio management indicates that long (short) stocks with low (high) news sentiment and high public news surprises will earn positive excess returns. We suggest that the relevant news of individual stocks could be applied to the prediction of abnormal returns and portfolio management.

Suggested Citation

  • Yang-Cheng Lu & Yu-Chen Wei, 2013. "The Chinese News Sentiment around Earnings Announcements," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 44-58, October.
    • Handle: RePEc:rjr:romjef:v::y:2013:i:3:p:44-58
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    References listed on IDEAS

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    Cited by:

    1. Muhammad Ateeq ur REHMAN & Furman ALI & Shang XIE, 2022. "Impact of Foreign Investment News on the Return, Cost of Equity and Cash Flow Activities," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 112-127, December.
    2. Tom Marty & Bruce Vanstone & Tobias Hahn, 2020. "News media analytics in finance: a survey," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(2), pages 1385-1434, June.
    3. Yu-Chen WEI & Yang-Cheng LU & I-Chi LIN, 2015. "The Impact Of Financial News And Press Freedom On Abnormal Returns Around Earnings Announcement Periods In The Shanghai, Shenzhen And Taiwan Stock Markets," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 39-59, September.
    4. Muhammad Ateeq ur REHMAN & Syed Ghulam Meran SHAH & Lucian-Ionel CIOCA & Alin ARTENE, 2021. "Accentuating the Impacts of Political News on the Stock Price, Working Capital and Performance: An Empirical Review of Emerging Economy," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 55-73, June.

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    More about this item

    Keywords

    media coverage; news sentiment; abnormal returns; earnings announcements; linguistic analysis;
    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
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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