National media and investor sentiment dynamics: evidence from China central television using a wavelet approach

ABSTRACT

This paper investigates the multiscale dynamic relations between China Central Television News (CCTV News) and investor sentiment in China by employing the wavelet method. We document significant positive correlations between CCTV News’s economic focus/economic tone and investor sentiment at the raw and high-frequency levels using the wavelet DCC-GARCH model. Wavelet Granger causality tests and wavelet coherence analysis confirm that the economic focus/economic tone of CCTV News is dominant and leads investor sentiment for short-term investors. At the same time, investor sentiment can conversely affect CCTV News’s economic focus/economic tone for medium-term investors. There is a long-term interdependence between CCTV News’s economic focus/tone and investor sentiment. Furthermore, the interaction between CCTV News and investor sentiment increases in turbulent periods compared with relatively calm periods. Finally, we find that CCTV News’s economic focus and tone positively affect the stock market returns. The influence seems to be an overreaction in the short term and an underreaction in the long term.

JEL CLASSIFICATION:

• Investor sentiment
• national media
• China central television news
• wavelet method

JEL code:

• C22
• C32
• G10
• G12
• E60

Acknowledgements

We are sincerely grateful to thank the Editor of Applied Economics Mark Taylor, and four anonymous reviewers for their insightful comments and helpful suggestions.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ CCTV News is a news program that broadcasts at 7:00 pm on CCTV-1, and is a core part of CCTV “with the highest audience rating, largest audience volume, and widest influence in the world” (Yang 1999). CCTV News has the strongest government undertone of any news program in China, and is usually regarded as the “barometer” or “weather vane of the Chinese policy climate”. The mission of CCTV News is government-appointed; that is, it works as the “throat and tone” of the central government, aiming to mobilize public support by acting as a loudspeaker for central government policies (Shirk 2011). CCTV News receives rigorous examination from authorities. The organization of CCTV News and CCTV are characterized by the dual supervision of the China Communist Party (CCP) and the government (Brady and Wang 2009). Besides that, the CCTV has supreme government authority among all media. CCTV News has been empowered by the highest authority in China to be the first to report major events relating to government policy. CCTV News therefore is a typical national media in China..

² Referring to Section 2.1..

³ http://www.cac.gov.cn/2014-02/28/c_126397488.html..

⁴ http://finance.sina.com.cn/stock/jsy/20150421/162022010090.shtml.

Additional information

Funding

We are grateful for the financial support from the National Natural Science Foundation of China (Nos.12171103; 71972057; 11801099; 72074071), Guangdong Philosophy and Social Science Planning Project (No.GD20XGL30), Guangdong Basic and Applied Basic Research Foundation (No.2021A1515011149), GuangZhou Basic and Applied Basic Research Foundation (No.202201010552), Natural Science Foundation of Guangdong Province (2021A1515012213)