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Are Financial Stocks Driven by Substantive Factors or Virtual Factors? Comparing Taiwan and China Markets

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  • Chi-Ming Ho

Abstract

This study employs information economics and the financial intermediary theory to explore the influences of private information in virtual communities and financial technology (fintech) derived from virtual currency on financial stocks. The paper conducts robust analyses on 67,166 data observations of the stock markets in China and Taiwan and finds that virtual currency development causes a structural change in the financial industry. The financial stocks in Taiwan are obviously driven by virtual factors, whereas those in China are subject to both pull from substantial factors and push from virtual factors. The research findings also suggest that the non-fundamental herding behavior driven by private information interferes with the value of financial stocks. However, financial innovations boost the competitiveness of the financial industry. It is advised to establish a policy to closely monitor the diffusion of private information and the exchange rate volatility between cryptocurrencies and home currencies to facilitate proactive financial risk management. JEL: A14, D82, F65, G12.

Suggested Citation

  • Chi-Ming Ho, 2024. "Are Financial Stocks Driven by Substantive Factors or Virtual Factors? Comparing Taiwan and China Markets," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 71(1), pages 95-118.
    • Handle: RePEc:voj:journl:v:71:y:2024:i:1:p:95-118:id:1284
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    File URL: https://www.panoeconomicus.org/index.php/jorunal/article/view/1284/814
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    More about this item

    Keywords

    Bitcoin; Fin-Tech; Private information; Social media; Herging effect;
    All these keywords.

    JEL classification:

    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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