Abstract
: Through an investigation into seven major industries in China’s stock market from 2002 to 2013, this study focuses on two main external determinants: market condition and policy change on intra-industry information diffusion. We employ both time-series and panel Vector Auto-regression (VAR) methods on a sample data of 1175 firms for the analysis. The investigation reveals that market conditions and policy changes affect the process of intra-industry information diffusion in China. The speed of intra-industry information diffusion in a down-market state is slower than an upmarket, especially when the evidence is more significant in the longer horizon of the market condition. Policy changes, especially the split-share structure reform, impede the process of intra-industry information diffusion. The investigation outcome also reveals that there is an increasing delay in intra-industry information diffusion over time in China’s stock market after 2005. However, because of the decreasing information volatility of intra-industry information diffusion, policy changes are useful to a certain extent.
Highlights
Under the Efficient Market Hypothesis (EMH), information diffuses without any delay in a complete and frictionless market
This paper investigates the impact of market conditions and policy changes on intra-industry information diffusion in China
Different with previous studies [4,5,6,18], the study focuses on intra-industry to investigate the process of information diffusion with view of both market conditions and policy changes
Summary
Under the Efficient Market Hypothesis (EMH), information diffuses without any delay in a complete and frictionless market. By including the market conditions and policy changes, this study stresses the roles of external determinants on intra-industry information diffusion in China’s stock market. To the best of our knowledge, this study is the first of its kind, which focuses on the intra-industry to investigate the process of information diffusion with views of market conditions and policy changes. With the specific conditions in China, the study focuses on whether and how policy changes influence the process of intra-industry information diffusion. Based on the most important policy changes, i.e., the split-share structure reform in 2005 and lifting short-sale constraints in 2010, this study is the first to investigate the impact of policy change on intra-industry information diffusion. As far as we know, no literature focuses on intra-industry to investigate information diffusion in China’s stock market.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
