This paper explores the relationship between media coverage and stock returns using monthly data of news reports from major Chinese newspapers. We find that firms with higher media coverage in the current month have higher sustainable stock returns in the following months over a one-year period compared with those with lower media coverage, which means that media coverage has a more significant and positive influence on sustainable stock returns in the markets, dominated by individual/immature investors. These results are largely robust to various robustness checks. Further empirical results demonstrate that in the Chinese stock market, a higher level of media coverage might cause higher sustained investor attention, which may drive up the buying pressure and thus lead to higher sustainable stock returns in the following year. Our results show that the effect of media coverage on stock returns depends on the characteristics of investors.
Media Coverage and Sustainable Stock Returns: Evidence from China