# Asymmetric response to PMI announcements in China's stock returns

**Authors:** Yingli Wang, Xiaoguang Yang  
**arXiv:** [1806.04347](https://arxiv.org/abs/1806.04347)  
**Date:** 2018-06-12  
**Summary page:** https://www.summarizepaper.com/en/paper/1806.04347v1/

## Key points

- Study by Yingli Wang and Xiaoguang Yang on impact of PMI announcements on China's stock market
- No significant market reaction to negative PMI news
- Positive news generates positive investor reaction, occurring one day prior to announcement and lasting around three days during expanding economic conditions
- Negative reactions towards negative news more common during downward economic conditions, especially for stocks with low market value or high price earnings ratios
- Factors influencing how different segments of the stock market respond to negative PMI reports identified
- Suggestions that China's stock market may exhibit a preference for risk-taking behavior due to high number of individual investors active in the country
- Hint at possibility of information leakage within the market, indicating potential inefficiencies or disparities in information dissemination and action by market participants.

## Summary

In their study titled "Asymmetric response to PMI announcements in China's stock returns," authors Yingli Wang and Xiaoguang Yang delve into the impact of Purchasing Managers' Index (PMI) announcements on China's stock market. The PMI is a crucial macroeconomic indicator and international experience suggests that stock markets typically react more strongly to negative news. Wang and Yang empirically investigate this phenomenon in the context of China's stock market and uncover intriguing findings. They observe asymmetric effects of PMI announcements on stock market reactions in China. Interestingly, they find that there is no significant market reaction towards negative PMI announcements, while positive news tends to generate a positive reaction from investors. This positive reaction usually occurs one day prior to the announcement and persists for approximately three days during expanding economic conditions. Conversely, the study reveals that negative reactions towards negative news are more prevalent during downward economic conditions, especially for stocks with low market value or high price earnings ratios. This suggests that certain factors influence how different segments of the stock market respond to adverse economic indicators like negative PMI reports. Furthermore, Wang and Yang suggest that China's stock market may exhibit a preference for risk-taking behavior due to the large number of individual investors active in the country. They also hint at the possibility of information leakage within the market, indicating potential inefficiencies or disparities in how information is disseminated and acted upon by market participants. Overall, this research sheds light on how PMI announcements can trigger varied reactions in China's stock market, highlighting nuances in investor behavior and market dynamics that warrant further exploration and analysis.