Inferring private information from online news and searches: Correlation and prediction in Chinese stock market

In this paper, we employ the difference between Baidu News (information supply) and Baidu Index (information demand) as the novel proxy for private information. The empirical results show that online news and searches are positively correlated with stock performance indicators. While, private information displays negative correlation with turnover and volatility. Besides, online news and searches hold solid predictive power for indicators. By comparison, private information only demonstrates reliable predictability with volatility. All these findings have some implications for investors who are interested in investing in Chinese stock market. •Baidu News and Baidu Index are employed to construct a novel proxy for private information.•Private information is negatively related to stock turnover and volatility.•Private information displays predictive power for stock volatility.