DOES THE COVID-19 MEDIA COVERAGE AFFECT AH PREMIUM DISPARITY?

ABSTRACT

This article explores the dynamic causality between the COVID-19 Media Coverage Index (MCI) in China (Chinese mainland and Hong Kong) and the AH premium index (both price and volatility) by applying a novel time-varying causality technology. Our findings show that the MCIs in China do not significantly cause the log-prices of the AH premium index throughout the full sample period, whereas significantly positive and time-varying causalities from the MCIs in China to the volatilities of the AH premium index are detected. The results thus provide evidence that the change of the MCIs does not lead to a wider or narrower AH premium but unidirectionally causes the change of its volatilities. Furthermore, the effect of MCIs in Chinese mainland on the AH premium volatilities is more pronounced and stable compared to that in Hong Kong, which indicates that the AH premium disparity is more sensitive to the media coverage in the Chinese mainland than in Hong Kong. Finally, the causal relationship from the MCIs in China to the AH premium volatilities disappears after November 2021. Our results provide implications for policymakers to decrease the fluctuation of the AH premium by effectively guiding the trend of media coverage;the results also remind AH stock investors to pay more attention to the COVID-19 media coverage. © 2023, Bucharest University of Economic Studies. All rights reserved.