Analysing the behavioural finance impact of "fake news" phenomena on financial markets : a representative agent model and empirical validation

Bryan Fong

This paper proposes an original behavioural finance representative agent model, to explain how fake news' empirical price impacts can persist in finance despite contradicting the efficient-market hypothesis. The model reconciles empirically-observed price overreactions to fake news with empirically-observed price underreactions to real news, and predicts a novel secondary impact of fake news: that fake news in a security amplifies underreactions to subsequent real news for the security. Evaluating the model against a large-sample event study of the 2019 Chinese ADR Delisting Threat fake news and debunking event, this paper finds strong qualitative validation for its model's dynamics and predictions.

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Year of publication:	2021
Authors:	Fong, Bryan
Published in:	Financial innovation : FIN. - Heidelberg : SpringerOpen, ISSN 2199-4730, ZDB-ID 2824759-0. - Vol. 7.2021, Art.-No. 53, p. 1-30
Subject:	Behavioural finance \| Bootstrapping \| Event study \| Fake news \| Representative agent model \| Finanzmarkt \| Financial market \| Anlageverhalten \| Theorie \| Theory \| Ankündigungseffekt \| Announcement effect \| Börsenkurs \| Share price \| Kapitaleinkommen \| Capital income

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Type of publication:	Article
Type of publication (narrower categories):	Aufsatz in Zeitschrift ; Article in journal
Language:	English
Other identifiers:	10.1186/s40854-021-00271-z [DOI] hdl:10419/237284 [Handle]
Source:	ECONIS - Online Catalogue of the ZBW

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