News release and the role of different types of investors

Junjun Ma, Xiong Xiong and Xu Feng

International Review of Financial Analysis, 2021, vol. 73, issue C

Abstract: We examine how investors react to positive and negative news in the Chinese stock market. We show that positive news is followed by a reversal in stock price, while negative news reports are accompanied by a drift. Using a unique account-level dataset, we find that institutional investors' attention bias contributes to the market's absorption process for different types of news, which is different from the conclusion that the phenomenon is driven by retail investors in the U.S. market. We explain the differences between the two markets as the short-sale constraints induce the attention bias of institutional investors in China. Individual investors are not able to correctly judge the content of news reports, and act as a liquidity provider. We highlight the market regulation plays an important role in the process of investors analyzing information.

Keywords: News; Institutional investors; Individual investors; Reversal; Drift (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:73:y:2021:i:c:s1057521920302854

DOI: 10.1016/j.irfa.2020.101643

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