This study investigates the relationship between the number of stock concepts and future returns, as well as the economic mechanisms underlying this association. Using novel collected data, we find that stocks with a greater number of concepts earn significantly higher returns in the subsequent month, generating a six-factor adjusted annualized alpha of approximately 9.6% for a long-short portfolio. Although these stocks exhibit higher turnover, return volatility, and investor attention - features commonly associated with speculative concept-driven trading - an analysis of cross-listed AH twin stocks reveals that concept counts do not widen the AH premium. Moreover, the return premium persists for up to 15 months without significant reversal, whereas firms that engage in opportunistic concept-chasing exhibit pronounced long-run reversals, suggesting that the positive concept-return relation is not driven by speculative motives. The higher returns are primarily attributable to strong industrial policy support and sustained above-expectation operating performance. Firms with more concepts are more likely to receive government subsidies and deliver positive earnings surprises, effects that are amplified when their core concepts receive stronger national policy backing. In contrast, firms that pursue concepts lacking substantive business relevance are significantly less likely to obtain government subsidies and fail to achieve above-expectation growth. Regarding investor composition, institutional ownership of high-concept stocks increases modestly, while ownership by government-guided funds rises substantially - particularly for stocks whose core concepts are strongly supported by national industrial policies. Conversely, concept-chasing behavior by listed firms significantly reduces the ownership ratio of government-guided funds. Overall, our findings indicate that concept stocks in China’s capital market are not purely speculative but signal underlying national policies.

This paper provides evidence that some seasoned equity offerings are motivated by public information. We test this channel in the supply chain setting, where supplier managers are more attentive than outside investors to customer news. We find that supplier firms are more likely to issue seasoned equity when their customer firms have negative earnings surprises. The results are mitigated when there is common scrutiny on the customer-supplier firm pairs by outside investors and analysts. Furthermore, long-run stock market performance appears to be worse for firms that issue seasoned equity following the negative earnings surprise of their customer firms.

Drifting in the direction of earnings surprises for a prolonged period is a decades-puzzling financial anomaly, i.e., the “post-earnings-announcement drift” (PEAD). This paper provided a new simple measure of earnings surprise called ORJ. Based on ORJ, not only is the medium effect of investors’ attention on the relationship between earnings surprises and PEAD analyzed, but a tractable and profitable investing strategy is provided. Through comprehensive empirical analysis of the Chinese stock market, we found that i) both earnings surprises and investor attention can increase the degree of PEAD; ii) “good” (bad) earnings surprises strengthen (weaken) the degree of drift by attracting (decreasing) investor attention; it is asymmetric that the positive effects of “good” earnings surprises are stronger than that of “bad” earnings surprises on PEAD; and iii) the strategy obtains an average 6.78% return per quarter in excess of the market and only longs dozens of stocks . iv) Typical pricing factors such as the Fama-French three factors, illiquidity and company characteristics have little explanatory power for the returns of the strategy. This paper strongly shows the importance of monitoring overnight returns of earnings announcements to digging the unexpected information, reveals one mechanism of earnings surprises on PEAD and demonstrates the potential profitability of PEAD in the Chinese market.

Using daily news tone data between 2017 and 2020, we examine whether news tones can predict stock returns in Chinese A-share market. We first document that the news tones significantly and positively predict the cross-sectional stock returns over next day and over the next 12-weeks. When we separate the news into online news and paper news, the online news exhibit strong predictive power for future returns, while the printed news only displays marginal predictive power. We hypothesize that the online news is more related to firm fundamentals, while the paper news is more linked to political aspects of firm information. Our results using earnings surprises and SOE subsamples provide supportive evidence for the hypothesis.