Media sentiment, news and liquidity of Chinese property developer stocks amidst the shadow of a mortgage crisis in China

Sergei Gurov and Tamara Teplova

International Journal of Emerging Markets, 2023, vol. 20, issue 6, 2223-2242

Abstract: Purpose - The study examines the relationship between news intensity, media sentiment and market microstructure invariance-implied measures of trading activity and liquidity of Chinese property developer stocks during the 2020–2022 Chinese property sector crisis. Design/methodology/approach - The authors adopt the extension of the news article invariance hypothesis, which is a generalization of the market microstructure invariance conjecture, from January 2020 to January 2022 to test specific quantitative relationships between the arrival rate of public information, trading activity and a nonlinear function of a proxy for the probability of informed trading. Empirical tests are based on a dataset of 22,412 firm-day observations and two count-data models to correct for overdispersion and the excess number of zeros. Seventy-five stocks of Chinese companies from the property development industry (including the China Evergrande Group) were included in the sample. Findings - The authors reject the news article invariance hypothesis but document a positive and significant relationship between the flow of public information and risk liquidity. Additionally, the authors find that the proxy for informed trading activity is positively related to the arrival rates of public information from October 2021 to January 2022. Originality/value - The findings support the hypothesis that negative (positive) media sentiment induces significant deterioration (insignificant improvement) in stock liquidity. The authors find that an increase in the number of news articles about a company corresponds to a higher liquidity of Chinese property developers' stocks after controlling for media sentiment.

Keywords: Mass media; Liquidity; Market microstructure; News sentiment; Trading activity; News article invariance hypothesis; G12; G14; G15 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijoemp:ijoem-08-2022-1232

DOI: 10.1108/IJOEM-08-2022-1232

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