Asymmetric responses to Purchasing Managers' Index announcements in China's stock returns

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

View graph of relations


Related Research Unit(s)


Original languageEnglish
Journal / PublicationInternational Journal of Finance and Economics
Publication statusOnline published - 13 Jul 2021


The study empirically analyzes the stock market response to the announcements of China's Manufacturing Purchasing Managers' Index (PMI). Asymmetric effects are observed, as follows: negative PMI announcements do not appear to influence the stock market, whereas positive PMI announcements have a significant effect. Evidence further suggests that negative announcements remain nonsignificant under any economic period (e.g., expansion, contraction, or stability), while the positivity effect observed becomes increasingly significant during both economic expansion and stability periods. Our study is not consistent with international experience, which suggests stock markets are more sensitive to negative news. A test sample of individual stocks was used to further investigate this phenomenon. We observed stocks characterised with lower levels of institutional ownership, smaller firm size, higher liquidity or low stock prices, react to positive news more consistently. These types of stocks are generally favoured by individual investors who are more easily influenced by positive PMI news. Unlike stock markets of America or Europe, individual investors dominate China's stock market. The ‘rise-chasing and down-freezing’ behaviour of the individual investors may explain why China's market reacts more readily to positive PMI announcements. Note: The ‘rise-chasing and down-freezing’ phenomenon refers to an investor who buys winning stocks warmly, while keeps the losing stocks at hand.

Research Area(s)

  • asymmetric response, Chinese stock market, economic period, individual investors, PMI announcements, rise-chasing and down-freezing