Does the U.S.-China trade war stop? A novel event study on fake news and stock price in China

This study leverages the unique fake news event on the U.S.-China trade war, and adopts the difference-in-differences framework to identify its two-stage effect on stock prices in China. Our results reveal that the spread of fake news, proclaiming the end of the trade war, caused stock prices of high-tech companies to soar. After it was clarified, prices gradually decreased until the end of the first stage. But in the second stage, the stock prices of these companies grew higher than their counterparts, caused by speculation beliefs. The two-stage effect was more pronounced for the high-tech companies on the Entity List.