The Relation between News and the Stock MarketThe Effect of Newspaper Information on the Holding of the Juristic Person and Stock Return
Date Issued
2009
Date
2009
Author(s)
Shang-Lun, Chung
Abstract
We know that the capital market in Taiwan is mostly composed of private investor. Lacking market information, their invest strategies depend on the mass media. However, the information from the mass media might not be so reliable. After some scandal breaking out, a lot of cheating tricks are revealed. It’s said that some malicious institute investors manipulate the information on the mass media to misdirect private investors. The most common cheat method is: they first claim that this stock has a bright future, and then sell it. In order to know whether this phenomenon exists or not, I want to investigate the over buying/selling information of institutional investors before and after a stock-related news is issued. Moreover, I also want to shed light on the information value of the stock-related news. I use the event study method to measure the interaction between the report of the mass media and (1) the over buying/over selling information and (2)the price of the stock. Therefore, the followings are my two study topics and brief conclusions: . Whether the over buying/over selling information of institutional investors is reasonable before and after a stock-related news is issued?. Foreign Investors increase their stock holding before the positive news is issued. After issued, they don’t significantly over buy or over sell. I interpret it as the Foreign Investor got the positive information before it’s issued, so they buy it. After issued, they are inclined to believe the adjusted stock price, so they hold it.. Investment Trusts over buy the stock before the positive news is issued, and then sell it after issued. The result supports the assumption that they apply the cheat method mentioned above, but I can’t jump into any conclusion because it’s just a sufficient condition. There still might be other reasons causing this pattern of buying/selling behavior.. Security Dealers don’t over buy or over sell before the positive news issued. However, they over sell their holdings after news issued. I interpret it as they are inclined to liquidate the stock when it reaches highest price.. For negative news, Foreign Investors, Investment Trusts, and Investment Trusts all sell their stocks before issued. After issued, they don’t significantly over buy or over sell. I interpret it as they know the information before issued, so they adjust their holdings.. Can investors use the news of mass media to get excess return?. Barely can we arbitrage by positive news.. It’s possible to arbitrage by negative news.
Subjects
Stock Holdings
Over Sell
Over Buy
Event Study
Information Effect
Private Investor
Type
thesis
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