Empirical Study On CCTV News Effect In Chinese Stock Market

In the information explosion period, attention becomes a kind of scarce resource. With plentiful information, but our attention is limited. In the financial markets, information could be reflected in the asset price only if they were noticed, investors should allocate their limited attention rationally. In recent years, that how investors’ attention affect financial markets are studied greatly by scholars home and aboard. Report about listed companies in the CCTV News, as a costless and authoritative source of information, will attract investors’ attention undoubtedly, which will lead to the imbalance of attention distribution.In this article, we choose CCTV News as events sample from Jan.2006to Feb.2011, study the influence of CCTV News Report on stock prices and explain the effect empirically. Firstly, we choose Event Study Method to account the CCTV News Effect, and use Market Model to calculate the Access Return and the Abnormal Volume of these stocks. We find that the stock prices went up greatly on day[0], CAR[0] is0.36%;after that there is a stock price reversal, CAR[+2,+15] is-0.76%. In the same time, the Volume on day[0] is0.87times more than the normal volume, and its changing trend among the event window is similar with the Access Return. Then, we study CCTV News Effect under several kinds of subsamples, and find out that under the following circumstances:the better market performance, or in the ShenZhen stock market, or higher abnormal performance, the influence of CCTV News Effect is stronger. Lastly, we construct multivariate regression model with Access Return as the dependent variable, Search Volume Index(SVI) of the Google Trends and stock market value as the agent variable of investors’ attention and the degree of information asymmetry separately. The results show that the coefficient of attention is positive and significant for CAR[0], negative and significant for CAR[+2,+15], but the coefficient of the stock market value is negative for both CAR[0] and CAR[+2,+15]. Based on these empirical results, we conclude that CCTV News Effect existed, the emergence of this effect is partly because of information hypothesis, and the key reason is the buying pressure driven by the attention. Knowing that how attention influences stock price and return, investors’ trading activities, it is of great value to explain some abnormal phenomenon in the stock market. Constructing the direct measure index, searching for the more common attention attracting events, both are potential research area.