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Stock Crashes and Jumps Reactions to Information Demand and Supply: An Intraday Analysis

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Abstract

The objective of this paper is to examine the possible linkage between the intraday stock price crashes and jumps and public information by using data from the Chinese stock market and Baidu Index. We divided public information into two kinds of information: supply through online media and information demand across inquiries by individual investors. Using a large sample from Chinese listed firms from 2013 to 2019, our evidence clearly indicates that online information supply and demand both have a positive impact on the intraday crashes and jumps; this is, the firm with higher information supply and demand more likely to experience intraday crashes and jumps. The results are robust to an alternative measure of crash risk. Moreover, we further examine whether the market conditions have an impact on the relationship between information flow and intraday crashes and jumps, and find that the marginal effect of information supply on intraday price crashes and jumps is smaller in the bull market phase. Moreover, the bull market phase enhances the effect of information demand on intraday price crashes and jumps.

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Notes

  1. Our findings below are qualitatively unchanged if we only include the lags but not the leads in the expanded index model.

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Acknowledgements

This work is supported by the National Natural Science Foundation of China (71771170, 71801136 and 71790594).

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Authors and Affiliations

  1. College of Management and Economics, Tianjin University, 300072, Tianjin, PR China

    Gang Chu, Dehua Shen & Yongjie Zhang

  2. School of Finance, Nankai University, 300350, Tianjin, PR China

    Xiao Li

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  1. Gang Chu
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Correspondence to Xiao Li.

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Chu, G., Li, X., Shen, D. et al. Stock Crashes and Jumps Reactions to Information Demand and Supply: An Intraday Analysis. Asia-Pac Financ Markets 28, 397–427 (2021). https://doi.org/10.1007/s10690-020-09327-z

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