Unexpected Information Demand and Volatility Clustering of Chinese Stock Returns: Evidence from Baidu Index

Abstract

This paper employs the Baidu Index as the novel proxy for unexpected information demand and shows that this novel proxy can explain the volatility clustering of Chinese stock returns. Generally speaking, these findings suggest that investors in China could take advantage of the Baidu Index to obtain information and then improve their investment decision.

Keywords

• volatility clustering
• baidu index
• information demand
• generalized autoregressive conditional heteroscedasticity model (garch)
• mixture of distribution hypothesis