Finance seminar - Professor Xiaofei Zhao - Georgetown University

A seminar by Professor Xiaofei Zhao from Georgetown University

Title: Corporate News and Stock Return Jumps Around the World

Abstract: What role does corporate news play in generating jumps in stock returns worldwide, and why does this relationship differ across countries? Using corporate-news data for publicly listed firms in 55 countries, we show that stock-return jumps are systematically related to news arrivals and their textual content in most markets. More importantly, we document substantial cross-country heterogeneity in the strength of this relationship. Countries with stronger news-jump effects tend to have higher Internet penetration, greater financial market development, and higher income levels, with Internet penetration emerging as the strongest correlate, consistent with broader information access and faster diffusion. This relationship remains robust when we control for other country characteristics, use alternative measures of Internet access, apply different jump identification thresholds, and focus on specific news categories. Extending the analysis to international information flows, we find evidence of cross-border spillovers: news about foreign industry peers helps explain domestic stock-return jumps beyond the effect of own-country peer news. These spillovers are stronger when the affected country has higher Internet penetration. Overall, our findings highlight the crucial role of information infrastructure and global information transmission in shaping discontinuous price discovery following corporate news across a broad set of firms, countries, and market environments

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