Frog In The Pan-a New Explanation Of Media Effect

With the development of the times and the innovation and improvement of Internet technology,the availability of media reports in people's daily lives has been greatly enhanced in the past 10 years.As the source of information,the company uses the media to pass information to the market in this era.At the same time,the media as a carrier of information and secondary creators will screen and create in the process of information dissemination.This media behavior affects the company's stock price performance and is called the “media effect” in the academic world.Looking back at a classic scientific experiment story-"frog in the pan",frogs face different temperatures to make different behaviors.This story also applies to the economic market.Da zhi et al.(2014)first proposed the phenomenon of “warm boiled frogs” in the economic market(Frog-in-the-Pan).On the base of reading and combing the relevant "media effect" and investor concerns,this paper analyzes and puts forward the phenomenon of "warm water boiled frog" that may exist in China's capital market.According to the definition,this paper constructs an indicator called “water temperature” responsing information change.The indicator is the actual media coverage minus the expected media coverage in the current period.We use the average report of the past few months as the expected media coverage.Based on media reports,the more companies in the current media have reported more reports(the “water temperature” is larger).Due to excessive investor concerns,increased market awareness,and increased liquidity,this paper predicts that its future earnings will be significantly lower than the current media.Companies that reported less than expected(the lower "water temperature").We selects Chinese listed companies from 2008 to 2017 as a sample,and uses text mining to measure the “water temperature” indicators reported by media,and studies the impact of excessive media coverage and insufficient reporting on stock prices.The study confirmed that the “temperature” reported by the media is significantly negatively correlated with the stock price.The higher the “water temperature”,the worse the future performance of the stock portfolio.Buying the “cold water” stock portfolio and selling the “boiling water” stock portfolio can get nearly 7% per year.Excess rate of return.Further analysis was carried out using original news,positive and negative reports and other indicators,confirming that the phenomenon of “warm boiled frogs” reported by the media is obvious in China.In the analysis of sentiment indicators,the phenomenon of “warm boiled frogs” may be derived from the inconsistency of positive information responses.In further research,this paper analyzes the mechanism of “warm water boiled frog” from the analysis of liquidity premium,investor cognition,excessive attention,and asset mispricing.The research in this paper finds that the relationship between media coverage and stock price provides a new explanation for investors and regulators to understand the "media effect",market drivers and formation mechanism.In the subsequent analysis,the stable existence of the phenomenon of “warm boiled frogs” was confirmed in both the online media reports,the proportionalization of the “water temperature” indicators and the indicators for changing the expected values.The paper further finds that investors respond adequately to negative information and respond adequately or even excessively to the positive information of “boiling water” companies,but there is insufficient response to the positive information of “cold water” companies.This direction has found a new perspective for the further research and interpretation of "warm boiled frogs".Perhaps to a certain extent,the phenomenon of "warm boiled frogs" mainly comes from the asymmetric reaction to positive information.At the end of the paper,this paper puts forward relevant suggestions for the development of the market from multiple dimensions.