Abstract
This paper uses the intensity of media coverage and trading records of retail investors to investigate the effect of media coverage on stock price bubbles. My analysis is based on a sample of intraday transactions from Chinese stock market and China Core Newspapers Full-text Database. In the first part of the study, I show that media coverage is positively correlated to stock price. In addition I also find that media coverage is positively correlated to the divergence of opinion, which in turn induces the stock price bubbles. In the second part of the study, I measure changes in investor sentiment based on the intraday retail transactions, and evaluate the joint impact of retail investor sentiment and media coverage on stock price bubbles.
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