| The stock market is always the media focus, thus there are plenty of news and rumors hanging around the market, which causes big problems for investors to identify and absorb the stock information. This paper is trying to collect the media news and rumors sample, analyze its spread channels, and estimate the media shocks.I basically conducted empirical work in this paper and my research interest lies in the media effect on China’s stock market. We get a close study on official news and rumors, analyzing their different shocks towards the stock prices in short, middle and long run. This paper combines psychological opinions with financial theories and employs the event study method, difference in difference regression method as well as moving windows portfolio return analysis method to estimate the abnormal reaction of the stock prices caused by different kinds of media news.My research in this paper is mainly divided into three parts:the official news effect, the rumor effect and the investment strategies based on the above two media effects.First of all, I pay special attention to the official news effect in the following points:(1) the information features of XinWenLianBo reports about the listed companies;(2) the stock price shocks caused by XinWenLianBo news, including impacts on short, middle and long term;(3) the standards for CCTV and XinWenLianBo program to select listed companies to be on show.According to the sample descriptions and model estimations, we could summarize up the essential sample features of XinWenLianBo reports:(1) statistically, XinWenLianBo tends to report huge size companies with state-owned background in major industries.(2) the probit model estimated results tell that listed companies with the above features are significantly more likely to be shown on XinWenLianBo in probability.The empirical results of the official news effect show that:(1) in short term, the investors are tend to ignore the XinWenLianBo news and the news information couldn’t be reflected by the stock prices immediately;(2) in the middle term, until about15trading days, the news information began to be integrated into the stock prices;(3) in the long term, the official news effect would last in several months.Secondly, I conducted some foundation work towards the rumor effect research.The rumor effect research in this paper is the first careful investigation about rumors on China’s stock market.(1) I find that most rumors are bullish news, among which profitability news, reorganization news and M&A news are the most prevailing ones.(2) In addition to some important commercial newspapers and websites, the information disclosure media specified by the China Securities Regulatory Commission also frequently publish rumors; the rumormongers even include the financial journalists and the stock analysts besides others.(3) The rumor involving firms are mainly characterized in comparatively large size and poor profitability but with indications for better prospect.All the rumors give abnormal shock to the stock prices, arriving at its peak on the very day of the rumor publication and the previous trading day. In the bull market, the investors tend to overreact to the rumors, which causes an extremely big shock to stock prices by contrast of that in the bear market. The investors are seemingly to take a "prefer to believe" strategy (include the post-denial period) which leads to the result that the denials of the good news do not yield in significantly dropping of the stock prices while the denials of the bad news make the stock prices fall further.Our study shows that the information disclosure of rumors in China has major problems, the investors perform irrational behavior when dealing with the rumors, the supervisory department and the listed companies must pay high attention to the existing institutional problems. Thirdly, I construct different arbitrage portfolios based on the above two kinds of media effects and study the effectiveness of these investment strategies. The results show that both arbitrage portfolios could earn significant positive abnormal returns. The official news portfolio appeals to the long run investors while the rumor portfolio is suit for short term tradings. |
PDF Full Text Request