Financial Transparency, Media Coverage, and Momentum in China

This paper digests the influences of financial transparency and media coverage in the Chinese stock market. In China, media performs under a regulatory system and media information is regarded as the direction of news. In addition, the Chinese market is dominated by retail investors and financial information is always manipulated, so the reliability of financial information is quite intriguing. The effect of ostensible financial information on the stock market through the media hype is a crucial issue. We employ media and transparency to analyze over 3,000 stocks in China. First of all, the Chinese stock market is characterized by significantly negative momentum profit and thus exhibits price reversal. However, when high media coverage and high transparency jointly come into play, the significantly negative momentum profit turns to be significantly positive. This dramatic change alters the price reversal to be price momentum. By contrast, low media coverage and low transparency still result in price reversal.

Automated summary

This paper examines the effects of financial transparency and media coverage on the Chinese stock market. In China, the media operates within a regulatory system where media information serves as a guide for news. With retail investors dominating the Chinese market and financial information often being manipulated, the reliability of financial information is of great interest. The research finds that high media coverage and high transparency can transform negative momentum profit in the stock market into positive momentum profit, while low media coverage and low transparency still result in price reversal.