Out of the Limelight but in Play: Trading and Liquidity of Media and Off-Media Stocks

45 Pages Posted: 25 Nov 2011 Last revised: 15 Mar 2012

See all articles by Lily H. Fang

Lily H. Fang

INSEAD - Finance

Jun Qian

Fanhai International School of Finance, Fudan University; University of Pennsylvania - Wharton Financial Institutions Center

Huiping Zhang

Shanghai University of Finance and Economics

Multiple version iconThere are 3 versions of this paper

Date Written: January 28, 2012

Abstract

Using a novel, hand-collected dataset of a popular financial TV show and intra-day trading data from China, we compare the trading, liquidity, and returns of on-the-show and off-the-show stocks from the same industry. Employing a difference-in-difference approach, we find that off-the-show stocks experience significantly greater improvements in liquidity with higher trading volume and lower bid-ask spreads after the show. These improvements are mostly attributed to small trades. Both on-the-show and off-the-show stocks experience positive abnormal returns that do not reverse one month after the show, and the return gap between these stocks before the show disappears. There is some evidence that small traders profit more from buying off-the-show stocks than on-the-show stocks after the show. Overall, our evidence suggests that media coverage facilitates price discovery, and retail investors, as a group, behave rationally and are not as naïve as typically thought in their reaction to news from mass media.

Keywords: G14, G12, G15

JEL Classification: Media, retail investors, trading, liquidity, return.

Suggested Citation

Fang, Lily H. and Qian, Jun and Zhang, Huiping, Out of the Limelight but in Play: Trading and Liquidity of Media and Off-Media Stocks (January 28, 2012). Available at SSRN: https://ssrn.com/abstract=1964440 or http://dx.doi.org/10.2139/ssrn.1964440

Lily H. Fang (Contact Author)

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France

Jun Qian

Fanhai International School of Finance, Fudan University ( email )

Shanghai
China
86-21-63895501 (Phone)
86-21-62934572 (Fax)

HOME PAGE: http://www.fisf.fudan.edu.cn/show-65-69.html

University of Pennsylvania - Wharton Financial Institutions Center

2306 Steinberg Hall-Dietrich Hall
Philadelphia, PA 19104
United States

HOME PAGE: http://fic.wharton.upenn.edu/fic/

Huiping Zhang

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

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