The Effects Of Rumors And Clarification Announcementson Stock Market Returns

China's securities market has been growing rapidly since its establishment more than 20 years ago,and the market system has been improving steadily.With the progress of science,technology and investor maturity,investors now can deal with complex information in the securities market.However,rumors have always been an uncertain factor for the interests of investors.China's securities market had rumors flying that disturbing the market.The situation has changed with the improvement of the regulations on investors and listed companies.The CSRC has also issued documents to regulate the clarification procedures of listed companies.To clarify rumors,most companies release clarifying announcements in specific medias or entities.But the qualities of the announcements are quite different;some are very detailed,and some are very simple.This paper focuses on the market's reaction to rumors and clarification announcements,and compares the difference between before and after the securities margin trading policy was introduced.This study provides useful information for our securities market.Based on previous results from the references and China's realistic situation,this paper proposes three hypotheses.I selected a total of 415 clarification announcements as a sample and then sorted the collected sample.I classified the announcements into three types: good,bad,neutral.The results show that good news generates positive abnormal returns while bad news generates negative abnormal returns.The abnormal returns often appear before the news is released,good news will influence the abnormal return of stocks 3 days before news released,but bad news influence abnormal return in the day that rumors released.That means some people knew it before it was published.Moreover,the clarification announcement didn't have expected effects on the price of listed companies.After clarification announcements,stock prices didn't return to the level in the absence of the rumor.In addition,the result of multiple regression shows that the more detailed the announcement is the more effect it has on the stock price.At the end of paper,I propose several suggestions to market participants and regulatory authority.