The effect of language on investing: Evidence from searches in Chinese versus English

Yin-Siang Huang, Hui-Ching Chuang, Iftekhar Hasan and Chih-Yung Lin

Pacific-Basin Finance Journal, 2021, vol. 67, issue C

Abstract: This study examines the language effect on investing behavior in local stock markets for local- and foreign-language investors using Google search records. First, we find that attention to a local language stimulates attention to a foreign language, increases abnormal news coverage, and has better predictability on stock returns. Second, investors who do Google searches in the local language react faster to a news event's shock than those who search in the foreign language. Third, only attention to the local language can reduce the price drift of an earnings surprise. Last, firm-level information asymmetry is a channel for local advantage. Therefore, we suggest that investors who use a stock market's local language have a local advantage when seeking more profitable investment opportunities in that stock market.

Keywords: Investor attention; Local advantage; Returns prediction; Earnings surprise; Information asymmetry (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G17 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:67:y:2021:i:c:s0927538x21000603

DOI: 10.1016/j.pacfin.2021.101553

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