News and return volatility of Chinese bank stocks

Kin-Yip Ho, Yanlin Shi and Zhaoyong Zhang

International Review of Economics & Finance, 2020, vol. 69, issue C, 1095-1105

Abstract: Using the comprehensive RavenPack Dow Jones News Analytics (DJNA) database that captures firm-specific news releases and their sentiment scores at high frequencies, we examine the contemporaneous correlation as well as the lead-lag relation between news and return volatility of major commercial banks listed on the Chinese stock market. Contrary to the Sequential Information Arrival Hypothesis (SIAH), most of the Chinese bank stocks do not exhibit significant lead-lag relations between news and volatility. However, there is substantial evidence that news is strongly correlated with return volatility in all the stocks, consistent with the Mixture of Distributions Hypothesis (MDH). Further analysis based on news sentiment scores suggests that positive news arrivals influence return volatility more strongly, compared with negative news. In addition, there is some evidence indicating that news arrivals contribute to the persistence in return volatility.

Keywords: Chinese stock markets; News sentiment; Stock return volatility; Lead-lag relations (search for similar items in EconPapers)
JEL-codes: G14 G21 N25 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:69:y:2020:i:c:p:1095-1105

DOI: 10.1016/j.iref.2018.12.003

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