From Shanghai to Wall Street: The Influence of Chinese News Sentiment on US Stocks

Kingstone Nyakurukwa and Yudhvir Seetharam

Journal of Behavioral Finance, 2025, vol. 26, issue 2, 187-200

Abstract: This study explores the influence of Chinese news sentiment on US stocks, focusing on the potential policy shift granting Chinese retail traders direct access to US markets. Analyzing the flow of information between Chinese news sentiment and global news sentiment using transfer entropy, the findings reveal a significant influence of Chinese news sentiment on global news sentiment. Moreover, the study identifies a predominant unidirectional flow of information from news sentiment to stock returns, with Chinese news sentiment having a more substantial impact on future returns of US stocks compared to global news sentiment. This suggests that if the proposed policy changes succeed, Chinese retail traders may rely on Chinese news sentiment, potentially leading to increased volatility in the US market. Policymakers and market participants should be aware of these implications to prepare for changes in the US stock market dynamics. Further research can provide deeper insights into the interplay between news sentiment, investor behavior, and market volatility.

Date: 2025
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DOI: 10.1080/15427560.2023.2270100

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