We examine the impacts of two types of news, forwarded news and novel news, on market reactions and investor
attention in the Chinese stock market. Surprisingly, we find that forwarded news evokes a stronger market reaction than novel news. To understand this phenomenon, we investigate and find three mechanisms through
which forwarded ...
We examine the impacts of two types of news, forwarded news and novel news, on market reactions and investor
attention in the Chinese stock market. Surprisingly, we find that forwarded news evokes a stronger market reaction than novel news. To understand this phenomenon, we investigate and find three mechanisms through
which forwarded news influences investor behavior: filtering, verification, and amplification effects. The filtering
effect shows that forwarded news, having been selected for resharing, contains information content that has
persistent effects on stock return. The verification effect indicates that forwarded news, particularly following
scandals involving news platforms, is perceived as more credible, thus eliciting a stronger market reaction. The
amplification effect shows that the redistribution of news magnifies its reach and captures investor attention,
leading to increased investor search and trading on the stocks. Moreover, the impact of forwarded news on
investor attention is more pronounced for firms with greater information opacity. Our results show the
distinctive roles of forwarded news and novel news in the financial market, highlighting the importance of
considering the heterogeneity of news information.
