GEM stocks are more susceptible to the attention of news media because of their liquidity and high risk characteristics. This paper uses Baidu News search and the data of companies listed on GEM from 2009 to 2015 to investigate the impact of media attention and stock liquidity on stock price information content respectively and the impact of stock liquidity on the relationship between media attention and stock liquidity. The results show that with the number of media news coverage increas ing and stock liquidity accelerat ing , stock information content will also be improved; further studies find that with the acceleration of stock liquidity, liquidity weaken s the positive relationship between media attention and shares information content.
The information content of share price refers to characteristics information of the company, which determines the effectiveness of the stock price signal transmission mechanism, affecting the allocation of resources in stock market, re- presenting the level of market efficiency. The classical theory on market efficiency suggests that the stock price has already contained all available information, so market news have no effect on the stock price fluctuations. Lots of literatures deny this view, and they argue that the media information affects the volatility of stock prices by influencing the trading behavior of investors; the information of corporate enters the stock price with investors’ information arbitrage behavior, thus affecting the information content of stock price.
The capital market in China has always been regarded as a “policy market” where the implicit endorsement of the government on the stock market makes the stock price rise or fall together more frequently. Compared with the other 40 major economies in the world, the stock price information content of China is only the second from bottom (Morck and Yeung, et al. [
With the development of information technology and the popularity of mobile Internet, the media information’s timeliness, the communication breadth and the depth of the content are significantly improved. Media news coverage has become an important link between enterprises, markets and investors, and media attention has more and more influence on social and economic life. In the West, media is often seen as a “Fourth Right”, which is independent of legislation, administration and justice. In China, with the development of cultural industry, the news media has also shown an unprecedented active state, what’s more, the function of media in the capital market has also been concerned by regulators. In July 2016, the Shanghai Stock Exchange published “The News Briefing Guidelines of Restructuring of Listed companies” to require restructuring of listed companies to hold a media briefing, and the first trial meeting in GEM should be open to the further media-developing areas where the news media played the role of information disclosure and public supervision. The news media plays a very important role in China’s securities market. The media is not only an important supplement to the information dissemination of listed companies, but also a pioneer in the reform of the information environment in securities market. As the information intermediaries of the capital market, the news media collect, collate and publish information, provide the company characteristics information for the public, and effectively alleviate the information asymmetry between managers and investors and the uneven information of different investors. More and more investors can make use of the information of the company to make decisions, thus affecting the information content of stock price (Luo J. H. and Cai D. [
The study of capital market information efficiency can’t be separated from the study of stock liquidity. Company-specific information is more frequently incorporated into stock prices as investors’ trade more often. Investors trade generally follow the following logic, at first, investors obtain the characteristics information about listed companies, based on which the investors make judgments on the investment value of the company, and compare with the current market price, to buy the underestimated stocks or sell the overvalued ones. Frequent trading makes the company characteristics of information can be timely, fully and accurately reflected in the company’s share price, affecting the stock price information content. Under normal circumstances, the transaction cost of high liquidity stock is lower, and more susceptible to arbitrage investors, to achieve information arbitrage, thus affecting its stock price information content. In addition, the media always pay much more attention to those stocks having fast liquidity. Then for stocks are different in liquidity, the relationship between media coverage and the content of information will differ.
After 10 years of brewing, the opening of China’s GEM attracted extensive attention. The first trial meeting is to open the media, reflecting the focus of regulators on the dissemination function of the press, while the news media’s omni- directional, multi-level reports on the GEM Companies also play a role in the changes of GEM market. For small and medium investors, media news coverage is the primary way to access investment information (Barber and Odean [
At present, the discussion of the role of news media in the capital market is a hot topic, but the relationship between the media attention and the information content of the stock price is still rare. In the existing literature on the relationship between media attention and stock price information content, the research object is usually the A-share market, and there is no special study on the GEM. Further, in empirical analysis, researchers directly use both proxy variables to conduct regression analysis; no one has researched from the view of stock liquidity. This paper based on that the individual investors are the majorities in the GEM, and individual investors are much more susceptible to the impact of mass media, and the high liquidity characteristics of the GEM, further analysis the relationship between the media attention and stock price information content in the GEM, and the impact of stock liquidity on this relationship.
This paper follows the logic of information economics and behavioral economics, uses the study of Rao Y. L., et al. (2010) [
The main content and the structure of the thesis are as follows: in the part of instruction, it mainly concerns study background, content, method, value of this article. The second part is the literature review. The third part is the theoretical analysis, and put forward the hypothesis of the paper. The fourth part introduces the sample, data, variables and empirical model. The fifth part is the result of empirical study, including descriptive statistical analysis, regression analysis and endogenous test. The last part is the conclusion.
Although investors have various accesses to investment information, still the press is an important way to expose “non-public information” or even the only channel (Tan S. T., et al. [
At present, there are few researches on the relationship between media attention and stock price information at home and abroad, and the viewpoints are not consistent. Have summarized the foreign researches, we can find out that the media reports may have a positive or negative impact on the information content of stock price. In particular, firstly, media reports can effectively reduce the cost of information collection of small and medium investors, which will help to expand the spreading scope of existing information, increase the proportion of informed transactions. High informed trading ratio will increase the pricing efficiency of the stock market, thus having a positive impact on the stock price information content (Dyck and Zingales [
The study of media attention and the stock information has appeared in the past two years, and the conclusions are not consistent. Luo J. H. and Cai D. [
Based on the above analysis, we find that most of the literatures about the media attention and the stock price information content in China have selected the A-share market as the research sample, and the conclusions are not the same. GEM, which enjoys high-growth and mainly serves high-tech innovative SMEs, whose trading rules, investor structure, market liquidity and other aspects have much significant difference from the motherboard market. Whether the press can enhance GEM stock price information content still remains to be further empirically tested. On the basis of the above analysis, in view of the individual investors are the majority in GEM, who are more susceptible to the impact of news media, therefore, this paper puts forward the first hypothesis:
H1: The increase in media attention is conducive to the improvement of stock information content.
Stock liquidity refers to the ability of stock trading quickly at a reasonable price, which is the embodiment of capital market vitality. At present, during the study of stock liquidity and price information content, most of foreign scholars affirmed the positive correlation between the two. The theoretical model of Holmstrom and Tirole [
There are few literatures on the study of stock liquidity and stock price information in China, and the research conclusions are slightly different. Chen M. G. and Mao X. Y. [
Based on the above analysis, this paper presents the second hypothesis:
H2: The acceleration of stock liquidity is conducive to the improvement of stock information content.
In general, the high-liquidity stocks are more popular to information arbitrage investors, and arbitrageurs affect the stock price information content in the realization of effective information arbitrage process (Du H. T. [
H3: With the acceleration of the liquidity level, the increase of media news attention reduces the increase of stock price information content.
The total sample is from 2009 to 2015, and the total sample is screened according to the following principles: 1) In view of the speculation atmosphere of new stock market is serious in China’s stock market, and investors are keen to “hit the IPO” resulting in the returns rate of new stock frequently fluctuate. So in the annual sample, we eliminate companies listed less than one year. 2) According to the stock information content calculation method, we exclude companies with less than 30 weekly yielding rates. 3) Eliminate samples with missing data of corporate governance or financial data. 4) Taking into account the measurement of news coverage data, the number of companies with more than 100000 media articles or less than 10 media articles is excluded from the annual data. After the above four-fold screening, we got the final 1310 valid samples. The annual distribution of the samples is as
The data used in this paper, except that the amount of media news is collected by hand, all the other data is from CSMAR1 database and WIND2 database. Stock weekly yield ( r i ), weekly trading value ( V a l t r d i ) and market circulation value ( M v o s d i t d ) are from the CSMAR database. Asset size ( S ize ), institutional shareholding ratio ( I n s ), shareholding ratio of the largest shareholder ( T op 1 ), return on total assets ( R oa ), industry ( I n d u s t r y ), listed years ( A g e ), return on equity ( R oe ) are from the WIND database.
Morck, Yeung and Yu [
Year | 2011 | 2012 | 2013 | 2014 | 2015 | Total |
---|---|---|---|---|---|---|
Capacity | 85 | 219 | 312 | 342 | 352 | 1310 |
Proportion | 6.49% | 16.72% | 23.82% | 26.11% | 26.87% | 100.00% |
Industry | Capacity | Proportion |
---|---|---|
Agriculture Industry | 21 | 1.60% |
Mining Industry | 17 | 1.30% |
Manufacturing Industry | 918 | 70.08% |
Electric, Heating, Gas and Water Production & Supply Industry | 4 | 0.31% |
Construction Industry | 18 | 1.37% |
Wholesale & Retail Trade | 16 | 1.22% |
Transportation, Warehousing & Postal Service | 9 | 0.69% |
Information Transmission, Software & Information Technology Services | 217 | 16.56% |
Leasing & Commerical Service | 19 | 1.45% |
Scientific Research & Technical Services | 20 | 1.53% |
Water Resources, Environment & Public Facilities Management | 17 | 1.30% |
Health & Social Work | 10 | 0.76% |
Culture, Sports & Recreational Services | 24 | 1.83% |
Total | 1310 | 100.00% |
pricing model. According to the meaning of the non-synchronous index R2 in capital asset pricing model, we take 1-R2 as the non-synchronous stock price indicators, think that the non-synchronous index of stock price reflects the degree that the stock price contains company’s characteristic information, that is, the larger is 1-R2, the more company’s characteristic information is, and the higher the stock information content is. The specific approach is:
The yield rate r i t of company i in period t is expressed as:
r i t = α + β i m r m t + ε i t . (1)
r m t refers to the market return rate in period t , mainly subject to the amount of market public information. The residuals ε i t reflects the part company-specific return fluctuations that can’t be affected by public information, that is, the effect of company characteristics information on stock returns. The goodness of fit R2 means synchronization degree that stock prices fluctuates with the market average price volatility, so 1-R2 can be used to measure the non-synchronous degree of stock price volatility, that is the proportion of corporate identity information stock price fluctuations reflect. On the individual stocks, the greater the impact of company traits on stock returns, the greater the stock price volatility, that is, the greater ε i t is, the greater is 1-R2, which also means the greater the stock returns that is affected by the firm-specific information, the greater the stock price information content, and vice versa. This approach has been widely used by many scholars at home and abroad (You J. X., et al. [
On the basis of the studies of Morck, Yeung and Yu [
r i j t = α + β 1 m r m t + β 2 j r j t + ε i t . (2)
Here, r i j t indicates return rate of stock i in j industry of t period. r m t indicates market return rate in t period. r j t indicates return rate of j industry in t period. ε i t is the residual items. Similar to Equation (1), the goodness of fit R2 in the above regression equation represents the effect of market and industry information on the change of stock return, while stock non- synchronization index 1-R2 represents the effect of firm characteristic information on stock return.
In order to avoid the lagged effect of market and industry information on stock returns fluctuation. Durnev, et al. [
r i j t = α + β 1 m r m t + β 2 j r j t + β 3 m r m t − 1 + β 4 j r j t − 1 + ε i t . (3)
It should be noted that the stock returns used in this paper is the weekly return rate that have considered the reinvestment of cash dividend, the market rate of return and industry earnings are calculated by the weekly return rate according to the weighted average market capitalization. r i j t is the weekly return rate of stock i in j industry t week, r m t is the market return rate in t week, r m t − 1 is the market return rate in t -1 week, r j t is the industry return in t week, r j t − 1 is the industry return rate in the t -1 week, ε i t is the residual term.
From the regression Equation (3), we can get the goodness of fit R2. In view of the value of R2 lies between 0 and 1, so the non-synchronous stock price index 1-R2 also lays between 0 and 1, which does not meet the normal distribution requirements in ordinary least squares regression, so we conduct the logarithmic conversion and the definition of non-synchronous stock price index is:
S yn = L n [ ( 1 − R 2 ) / R 2 ] . (4)
There is no uniform approach to the measurement of media attention in the current literature. In this paper, we take the methods of Rao Y. L. and Wang P. [
On the selection of stock liquidity index, this paper learns from the previous studies, and uses the average daily turnover rate within the year to measure stock liquidity:
T o v e r i t = 1 D i t ∑ D = 1 D i t ( V a l t r d i d t M v o s d i d t ) . (5)
V a l t r d i t d is the transaction amount of stock i in d week t year. M v o s d it d is the circulation market value of stock i in d week t year. D it is the total number of trading weeks.
According to the related literatures, this paper select the following control variables: the size of the company ( S i z e ), the proportion of institutional ownership ( I n s ), the proportion of the largest shareholder ( T op 1 ), financial leverage ( L ev ), asset-liability ratio (ROA), I n d u s t r y and Y ear .
1) Enterprise size ( S i z e )
This paper selects the total assets at the end of the year as the proxy variable of firm size. In general, the larger the company, the more famous the brand, and the company will be more susceptible to the extensive concern of investors. Investors have greater motivation to do information arbitrage, and the stock price information is the more.
2) Institutional shareholding ratio ( I n s )
The institutional shareholding ratio used in the paper refers to the proportion of the number of shares held by institutional investors, including funds, brokerage firms, brokerage products, QFII, insurance companies, social security funds, trust companies, finance companies, banks, the sun private, general corporate and non-financial listed companies. The institutional shareholding index used in the paper is directly from the WIND database.
A large number research shows that institutional investors because of its advantages in the information collection and information processing, the number of shares and trading activities are closely linked with individual stocks excess returns and price efficiency. Generally speaking, the institutional shareholding promotes the market information efficiency.
3) The largest shareholder ratio ( T op 1 )
The proportion of the largest shareholder ( T op 1 ) reflects the concentration of ownership. Generally speaking, the motivation for investors to collect information depends on the amount of their holdings, and shareholders with large holdings are more likely to collect information for arbitrage.
4) Financial Leverage ( L ev )
Select the asset-liability ratio ( L ev ) that is the ratio of total debt to total assets at the end of year to measure financial leverage.
5) Return on Total Assets (ROA)
Return on total assets (ROA) measures the overall profitability of an enterprise.
6) Industry ( I n d u s t r y ), year ( Y ear ) and dummy variable
The industry variable is classified according to the Guidelines for Industry Classification of Listed Companies (2012 Revision) issued by China Securities Regulatory Commission. This paper controls two types of dummy variables: industry classification variable ( I n d u s t r y ) and annual variable ( Y ear ).The varia- bles used in the paper are shown in
For the three sets of assumptions proposed above, the following three models were designed:
S y n i t = β 0 + β 1 L n M edia i t + ∑ β j C on t r o l i t + I n d u s t r y + Y ear + ε i t . (6)
S y n i t = β 0 + β 1 L n M edia i t + β 2 T over i t + ∑ β j C on t r o l i t + I n d u s t r y + Y ear + ε i t . (7)
S y n i t = β 0 + β 1 L n M edia i t + β 2 T over i t + β 3 T o v e r i t M edia i t + ∑ β j C on t r o l i t + I n d u s t r y + Y ear + ε i t . (8)
Equation (6) examines the relationship between media attention ( L n M edia ) and stock price information ( S yn ) to verify hypothesis H1. Equation (7) validates the relationship between stock liquidity ( T over ) and stock price information ( S yn ). Equation (8) is used to investigate the modulation effect of stock liquidity ( T over ) on the relationship between media attention ( L n M edia ) and stock price information ( S yn ). We get Equation (8) on the basis of the Equation (6) added the cross term of media attention and stock liquidity to verify hypothesis H3.
Types of variables | Variable symbol | Variable declaration |
---|---|---|
Explained Variable | The value of the stock non-synchronization, equals to the transformation of value of the goodness-of-fit obtained from the regression model (3) | |
Explanatory Variable | Media attention, equals to the natural logarithm of the number of news articles plus 1 | |
Turnover rate, equals to the average daily turnover rate within the year | ||
Control Variable | Company size, equals to the total assets at the end of year | |
Shareholding Ratio of Institutional | ||
Shareholding ratio of the largest shareholder | ||
Debt-to-assets ratio | ||
Return On Assets | ||
Industry Dummy | ||
Year Dummy |
stats | N | min | mean | max | p50 | p25 | sd |
---|---|---|---|---|---|---|---|
R2 | 1310 | 0.001 | 0.483 | 0.980 | 0.490 | 0.360 | 0.176 |
Syn | 1310 | −2.372 | 0.227 | 5.249 | 0.153 | −0.306 | 0.781 |
Media | 1310 | 24.000 | 2058.196 | 284000.000 | 1140.000 | 866.000 | 10359.577 |
LnMedia | 1310 | 3.219 | 7.124 | 12.557 | 7.040 | 6.765 | 0.713 |
Tover | 1310 | 0.026 | 0.193 | 0.700 | 0.168 | 0.107 | 0.111 |
Size | 1310 | 266.121 | 1880.408 | 23733.477 | 1333.923 | 915.664 | 1792.556 |
Ins | 1310 | 0.001 | 27.586 | 151.474 | 22.779 | 9.889 | 21.194 |
Top1 | 1310 | 4.380 | 31.922 | 69.360 | 29.990 | 22.460 | 12.641 |
Lev | 1310 | 1.105 | 26.233 | 88.643 | 23.300 | 13.739 | 16.040 |
Roa | 1310 | −45.381 | 6.182 | 31.763 | 5.966 | 3.131 | 5.684 |
the median is 0.153, and the standard deviation is 0.781. There is a certain gap between the companies. The statistical results of media attention show that the average annual number of news report about GEM listed companies is 2058, an average of 5.6 every day, and this results were significantly higher than similar studies on the A-share market statistics, which reflects media’s preference for the GEM Market from the side point. The average of annual average stock turnover is 19.3% in GEM, and the average shareholding ratio of institutional investors is 27.59%.
The Model (6) column in
According to the result of regression, when uses stock price non-synchroni- zation index S y n as the proxy variable of stock information content, the media attention variable L n M edia is positively correlated with stock price information content at the 1% significance level, that is, the more news media reports, the higher the stock price information content. This result is consistent with the results of Huang J. and Guo Z. R. [
The regression analysis of control variables show that institutional ownership ( I n s ) is positively correlated with stock price information ( S y n ), but this result is not statistically significant, suggesting that institutional investors of GEM do not play their professional advantage in information mining and information processing. The proportion of shareholding of the largest shareholder T op 1 is
Variables | Model (9) | |
---|---|---|
0.324** | ||
(−2.29) | ||
0.952*** | ||
(−5.67) | ||
0.584*** | ||
(−3.29) | ||
0.0000252*** | ||
(−2.72) | ||
0.00262*** | ||
(−3.14) | ||
0.001 | ||
(−1.31) | ||
0.003*** | ||
(−3.03) | ||
0.009*** | ||
(−3) | ||
0.084*** | ||
(−3.78) | ||
0.008*** | ||
(−3.34) | ||
12.730*** | ||
(−2.67) | ||
0.002* | ||
(−1.69) | ||
Constant Term | −2.480*** | 6.127*** |
(−2.89) | (−26.21) | |
Controlled | Controlled | |
Controlled | Controlled | |
Sample Capacity | 1310 | 1310 |
t statistics in parentheses *p < 0.1, **p < 0.05, ***p < 0.01.
positively correlated with the information content of stock price at the significance level of 5%, which indicates that the ownership concentration is beneficial to the improvement of the information content of stock price. Company size ( S ize ) is positively correlated with stock price information, which is consistent with the conclusion of Wu W. L. and Zheng Z. [
The Model (7) column in
The Model (8) column in
In view of Luo J. H. and Cai D. [
S y n i t = β 0 + β 1 L n M edia i t + β 2 T over i t + ∑ β j C on t r o l i t + I n d u s t r y + Y ear + ε i t . (9)
L n M edia i t = β 0 + β 1 S yn i t + β 2 A g e i t + β 3 | R oe i t | + β 4 R − var i t + β 5 D e v e l o p i t + I n d u s t r y + Y ear + ε i t . (10)
In the simultaneous equation model (9), the variables that affect the stock price information ( S y n ) are consistent with the regression model above, and the variables that affect the number of media news reports ( L n M edia ) except for the stock price information ( S y n ), taking into account the usual situations. The companies with longer the time to go public, the better or worse the operating results, the more obvious stock price fluctuates, the higher the development of regional media, will be more vulnerable to the media’s favor. So we add the company listing time ( A g e ), the absolute value of return net assets ( | R oe | ), the variance of the weekly return on stocks ( R − var ), and the media development index ( D e v e l o p ) of the province in which the company is located. In addition, the dummy variables of company’s industry ( I n d u s t r y ) and annual ( Y ear ) are controlled. It is worth noting that the media development index ( D e v e l o p ) is used as an instrumental variable of the number of media reports ( L n M edia ) derived from Media Development Indices by Province by Yu G M [
Regression analysis of the model (9) was performed in
It can be seen that, after controlling for the endogeneity between the number of news media reports( L n M edia i t )and the price information content ( S y n ), the coefficient of is still significantly positive at the 5% significance level, demonstrating that the news media report significantly increases stock price information once again, which proves the conclusion obtained in this paper is robust.
With the popularity of mobile internet, the development of information age, the so-called “information explosion” is more and more obvious. The press contacts more closely with people’s production and living. In this case, the importance of the news media is self-evident. The GEM is favored by many news media because of its high liquidity and high risk. In addition, the investors of GEM are mainly small and medium investors who have obstacles in information gathering and information processing, and they tend to get investment information from the news media. Obviously, if the news media reports can provide useful information about the listed companies, it will help investors make more reasonable investment decisions so as to enhance the market information efficiency and promote the information content of the stock price. Based on this, this article uses “Baidu News” advanced search to search articles with titles containing the name of the sample, and uses the number of articles to measure media attention, uses non-synchronous stock price index to measure the information content of stock prices and empirically analyzes the effect of media attention on stock price information. It turns out that the quantity of media news reports and the stock liquidity are positively correlated with the information content of stock price, that is, the information content of stock price increases with the increase of the number of media news reports and the acceleration of stock liquidity. This conclusion is still significant after eliminating endogenous. Further study found that stock liquidity weakened the promotion role of the media attention on the stock information content. This interesting conclusion may be due to that, when stock liquidity accelerates, since the market is active, investors’ analytical judgment about the characteristic information is vulnerable to the impact of market liquidity, whose acceptability of media news reports will be weakened to a certain extent, which may reduce the positive effect of media attention on the information content of stock price. It may be because when the market liquidity increases, the press is also active, various news contents may appear and different news reports will make it difficult for ordinary investors to identify information and make investment decision. They need further analysis to identify the specific reason.
The conclusions of this paper have the following theoretical and policy significance: Academically, the result that there exists positive relationship between media attention and the price information content in GEM, perfects information environmental governance theory in China’s GEM, and provides theoretical su- pport for exploring the effectiveness of China’s capital market. Practically, there are three aspects. First, the promoting role of media news reporting in the information content of stock prices, clarifies the role of external supervision in China’s capital market, and provides empirical evidence for regulators to give full play to the role of information disclosure. Second, for the investors, the result of this paper is helpful to guide investors to make better use of the media reports to make investment decisions and alleviate the information asymmetry in the capital market. Third, the listed companies can make full use of the media’s information dissemination function so as to make more company characteristics information into the company’s stock price, which can make the stock price close to the company’s intrinsic value and can improve the financing efficiency of listed companies.
However, due to the availability of data and other related technical reasons, this paper has some limitations. For example, the media attention is measured by the number of manually searched news articles, and there is no breakdown of the types of news media and news content; the accuracy of the data may be a problem. In addition, because of the simple operation and the availability of data, this paper uses stock price non-synchronization index as a proxy variable of the information content of stock price; the accuracy of this index is questioned. For these limitations, further research needs to be further improved.
Cao, N.B. (2017) Research on the Relationship of Media At- tention, Stock Liquidity and Stock Price In- formativeness: Based on the Data of Listed Company on GEM of China. Modern Eco- nomy, 8, 51-77. http://dx.doi.org/10.4236/me.2017.81005