Knowledge is Power: A Field Experiment in the Chinese and US Stock Markets

Abstract

This study examines the causal effect of financial knowledge on stock pricing efficiency. Leveraging a specially designed investor education website, we conduct a field experiment, sharing insights on the pricing of accounting accruals with investors across China and the US on social media. We find that the treatment stocks experience a reduction in accrual mispricing relative to the control stocks. This effect is particularly pronounced when knowledge that enhances the conceptual understanding of accruals is paired with knowledge that aids in the quantitative application of accruals. Furthermore, the treatment effect is strengthened among stocks with investors who engage more deeply with the educational contents yet possess lower financial sophistication.

Keywords: Financial knowledge, accrual mispricing, investor education, field experiment, social media

JEL Classification: G14; G41, G53, C93