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Extreme state media reporting and the extreme stock market during COVID-19: A multi-quantile VaR Granger causality approach in China

Author

Listed:
  • Hong, Yun
  • Jiang, Yanhui
  • Su, Xiaojian
  • Deng, Chao

Abstract

This study examines the causality between extreme state media coverage and extreme stock market return during the COVID-19 crisis in China. Using XinwenLianbo as a proxy for national media, we find bidirectional Granger causality between state media focus/tone and stock market returns under extreme conditions. We also find that the spillover effects of extreme risk are heterogeneous across different industries, companies of different sizes and ownership structures, and at different timescales for stock market returns. Robust and extended testing shows that our results are valid after accounting for the severe impact of COVID-19, although the extreme risk spillover effect may vary slightly on weekends. The focus and tone of national media greatly impact retail and institutional investors, respectively. We also notice that investors have become more optimistic in the post-pandemic era, and the share price plunge on the first day after the Chinese New Year 2020 has had a significant impact on national media coverage.

Suggested Citation

  • Hong, Yun & Jiang, Yanhui & Su, Xiaojian & Deng, Chao, 2024. "Extreme state media reporting and the extreme stock market during COVID-19: A multi-quantile VaR Granger causality approach in China," Research in International Business and Finance, Elsevier, vol. 67(PA).
    • Handle: RePEc:eee:riibaf:v:67:y:2024:i:pa:s0275531923002696
    DOI: 10.1016/j.ribaf.2023.102143
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    Keywords

    State media; Stock market; Ownership; Extreme risk; VaR granger causality;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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