Impact of Unrelated News on Stock Prices: Evidence from Investors' Irrationality in the Stock Market of China

Abstract

In traditional finanace theory the news relating to firm fundamentals will only affect stock prices. However, in China unrelated news have effects on stock prices for some evidences in behavioral finance shows that investors can behave irrationally and this irrationality might have impact on stock prices. We investigate four companies in China and show the totally irrelevant news events' impact on their stock prices. We give some evidence on the close relationship between seemed unrelated events and stock prices. And we also calculate the durative phrase of the unreleated information's impact on stock prices.