Policy signaling and stock price synchronicity: Evidence from China

Xiaohui Hou and Rui Yang

Journal of International Financial Markets, Institutions and Money, 2021, vol. 75, issue C

Abstract: We investigate whether stock price synchronicity is associated with province-level policy support signaling in the case of China. China provides a unique opportunity to investigate the impacts of varied policy signaling across provinces within one national environment. We show that stock price synchronicity is higher for firms in provinces with explicit policy support signaling. Furthermore, more intensive policy support signaling results in increasing stock price synchronicity. Additional robustness tests and mechanism analyses also confirm our empirical results. Our conclusions convincingly show that province-level policy signaling is an important external information source that is valued by China’s investors.

Keywords: Policy signaling; Stock price synchronicity; Text mining; China (search for similar items in EconPapers)
JEL-codes: G14 G15 G18 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:75:y:2021:i:c:s1042443121000743

DOI: 10.1016/j.intfin.2021.101355

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