Does sentiment depend on reference level? Evidence from Hong Kong Typhoon Signals

Speaker：Cai Jinghan（Associate Professor ,Scolandon University in the United States）

Host：Zhou Kaiguo,  Professor, Lingnan College

Time and Date：9:30-11:30, Jun. 17, 2022

Venue: Room 902, MBA building

Language: English + Chinese

Meeting Link: Tencent meeting number: 657-332-094

Abstract:

We find empirical evidence supporting the expectation-based reference-dependent preference through the positive sentiment created by holidays using the unique features of Hong Kong stock market. First, we find that sentiment is experienced relative to a reference level: The stock market goes up on the days with likely day-off from looming typhoons and this typhoon effect is stronger than the holiday effect from weekends and public holidays. Second, the reference level for sentiment is based on expectation: The stock market goes up more on days with stronger typhoon signal and under strengthening typhoon signals but goes up less under weakening signals. Third, the informativeness of a signal is important such that barely informative good news can be undesirable: The stock market goes down under weak standby typhoon signals. 

 Profile of the speaker:

Cai Jinghan, an associate professor of the Department of Economics and Finance of the University of Scania Business School of the University of Scraton, a bachelor of Financial Studies, Ph.D. in Economics, Boston College, Ph.D. PhD. He has worked at the Shenzhen Stock Exchange Institute and the Bank of China. The main research directions are behavioral finance, financial markets, and market micro structures. Published a number of academic papers. The main research results were published in Review of Financial Studies, Economics Letters, Finance Research Letters, high -level journals such as "Journal of Management Science", "Financial Season" and "Chinese Finance".