Modeling And Empirical Research On Investors' Reaction To New Product Announcements

With the high-speed development of the technology and the rapid change of the market,the life cycle of products is shorter and shorter.New products play a momentous role in developing and maintaining the competitive advantages of a firm.Corporations that are able to launch more new products tend to create and seize better opportunities in the fiercely competitive environment.Thus,new product announcement(NPA)is a crucial issue which affects the majority of shareholders,which contains consumers,competitors,supplier,distributors,and investors,etc.The shareholders‘ reaction to NPA has become an ongoing research hotspot in last decade.There has been a good deal of the existing studies focus on the consumers and competitors‘ reactions to NPA.However,little research exists to date concerns the impact that NPA acts on stock investors,who are the core entity of stock market and the springhead of stock market volatility.New products announced by listed companies are frequently regarded by stock investors as a signal foreboding stock market swings,stock investors have been one of the most important shareholder of NPA.However unfortunately,the research on investors‘ reaction is scarce and the conclusions are inconsistence.It is pivotal to deep ly research on this problem.This study takes investors‘ reactions into account and systematically explores the mechanism of investors‘ reactions to new product announcements,analyzes the investors‘ reaction process and the investment behavior.This study empirically examines investors‘ reaction to new product announcements and builds some mathematical models to quantitatively solve this problem.First,this study defines the concepts of new product announcements and investors‘ reaction,summarizes the foundation theories of market signaling theory and behavioral finance theory.Further,this study analyzes the internal factors and external factors to discover the mechanism of investors‘ reaction to new product announcements.Based on the foundation theor ies and the factors analysis,this paper explores the mechanism of investors‘ reactions to new product announcements,so as to provide the theoretical foundation for the following chapters.Second,based on the market signaling theory,this paper considers the new product announcements as a market signal,and investigates the investors‘ reaction to this signal.Further,this study analyzes the role of investor sentiment in the process of investors‘ reactions to new product announcements.Using the event study and regression analysis methods,this study verifies the signaling role of new product announcements,and the moderating role of investor sentiment in the process of investors‘ reactions to new product announcements.Finally,this study is turning to build a mathematical model for stock investors‘ reaction to new product announcements.Based on the signaling role of new product announcements,this paper analyzes the process of new product announcement signal,the process of investors‘ reception and reaction to the signal,and the varying pattern of the signal intensity,and so on.Firstly,this paper analyzes the process of new product announcement signal and the different types of investors‘ reaction to new product announcement signal,and builds a basic model of investors‘ reaction to new product announcements.Secondly,we consider the time delay effect in the process of investors‘ reception and reaction to the signal,and build a time-delay model of investors‘ reaction to new product announcements signal.Finally,we consider the dynamic change of the signal intensity and the investors‘ reaction to dynamic signal.Drawing on viral dynamics theory,this paper looks upon investors in stock market as cells in vivo and the NPA signals as free virus,and presents a differential equations model with time-delay to investigate the stock investor behavior driven by new product announcement signal.The modeling of the investors‘ reaction models is the core module of this study.This study has theoretical implications for the research of new product announcement and stock market response.Our study makes a contribution by highlighting the dynamic process that new product announcement diffuses in stock market and the investors‘ reception and reaction to the signal.With a wider horizon,this study can also provide guidance for other similar research on the stock investors‘ reaction.Furthermore,we believe that a better understanding of stock investors‘ reaction to new product announcement has important implications not only for researchers but also for managers and investors.We provide a practical way for managers to measure and predict the stock market reaction to the new product announcement they deliver,and accordingly make strategies of new product development and investors communication.In the meanwhile,with the conclusions of this study,stock investors can give themselves some rational and reasonable guidance.In the long run,we hope this paper could make some contributions to the information disclosure sys tem and the sound development of Chinese stock market.