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Author: Michael S. Drake
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
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Book Description
Prior literature has documented that investor attention and constraints on that attention are associated with the pricing of stocks. We introduce the concept of attention comovement, which is the extent to which investor attention for a firm is explained by attention paid to the firm's industry and the market in general. We find that attention comovement is non-trivial for the average firm and is related to firm characteristics, such as size and visibility. We also find that the comovement of investor attention has market consequences, in that it is positively associated with excess stock return comovement. Finally, we show that a firm's earnings announcement contributes to the transfer of attention from one firm to its peer firms. Our results provide insights about the information flows underlying return comovement and aid in understanding the micro- and macro-nature of investor attention.
Author: Michael S. Drake
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
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Book Description
Prior literature has documented that investor attention and constraints on that attention are associated with the pricing of stocks. We introduce the concept of attention comovement, which is the extent to which investor attention for a firm is explained by attention paid to the firm's industry and the market in general. We find that attention comovement is non-trivial for the average firm and is related to firm characteristics, such as size and visibility. We also find that the comovement of investor attention has market consequences, in that it is positively associated with excess stock return comovement. Finally, we show that a firm's earnings announcement contributes to the transfer of attention from one firm to its peer firms. Our results provide insights about the information flows underlying return comovement and aid in understanding the micro- and macro-nature of investor attention.
Author: Michael Ehrmann
Publisher:
ISBN:
Category : Investments
Languages : en
Pages : 28
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Book Description
This paper tests whether fluctuations in investors' attention affect stock return comovement with national and global markets, and which stocks are most affected. We measure fluctuations in investor attention using 59 high-profile soccer matches played during stock market trading hours at the three editions of the FIFA World Cup between 2010 and 2018. Using intraday data for more than 750 firms in 19 countries, we find that distracted investors shift attention away from firm-specific and from global news. When movements in global stock markets are large, the pricing of global news reverts back to normal, but firm-specific news keep being priced less, leading to increased comovement of stock returns with the national stock market. This increase is economically large, and particularly strong for those stocks that typically comove little with the national market, thereby leading to a convergence in betas across stocks.
Author: Wei Xiong
Publisher:
ISBN:
Category :
Languages : en
Pages : 39
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Book Description
This paper analyzes the effect of an increase in market-wide uncertainty on information flow and asset price comovements. We use the daily realized volatility of the 30-year treasury bond futures to assess macroeconomic shocks that affect market-wide uncertainty. We use the ratio of a stock's idiosyncratic realized volatility with respect to the Samp;P 500 futures relative to its total realized volatility to capture the asset price comovement with the market. We find that market volatility and the comovement of individual stocks with the market increase contemporaneously with the arrival of market-wide macroeconomic shocks, but decrease significantly in the following five trading days. This pattern supports the hypothesis that investors shift their (limited) attention to processing market-level information following an increase in market-wide uncertainty and then subsequently divert their attention back to asset-specific information.
Author: Lin Peng
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
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Book Description
Motivated by psychological evidence that attention is a scarce cognitive resource, we model investors' attention allocation in learning and study the effects of this on asset-price dynamics. We show that limited investor attention leads to category-learning behavior, i.e., investors tend to process more market and sector-wide information than firm-specific information. This endogenous structure of information, when combined with investor overconfidence, generates important features observed in return comovement that are otherwise difficult to explain with standard rational expectations models. Our model also demonstrates new cross-sectional implications for return predictability.
Author: Efthymia Symitsi
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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Book Description
We investigate investor's correlated attention as a determinant of excess stock market comovement. We propose a novel proxy, "co-attention", that measures the correlation in demand for market-wide information across stock markets approximated by the Google Search Volume Index (SVI). Our results reveal significant co-attention driven to some extent by correlated news and fundamentals. Most importantly, we find a positive association between co-attention and excess correlation. This effect is more pronounced in developed economies and during recessions. We fail to document significant effects of correlated news supply on stock markets, lending support to the idea that information demand governs investing decisions. Co-attention is not only induced through international investors but domestic investors as well. Our results provide evidence of attention-induced financial contagion in unrelated economies. International investors' co-attention appears to facilitate volatility transmission indirectly across markets.
Author: Joshua Matthew Pollet
Publisher:
ISBN:
Category : Collective behavior
Languages : en
Pages : 167
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Book Description
Author: Stefano Mengoli
Publisher:
ISBN:
Category : Information theory in economics
Languages : en
Pages : 46
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Book Description
Retail investors pay over twice as much attention to local companies than non-local ones, based on Google searches. News volume and volatility amplify this attention gap. Attention appears causally related to perceived proximity: first, acquisition by a nonlocal company is associated with less attention by locals, and more by nonlocals close to the acquirer; second, COVID-19 travel restrictions correlate with a drop in relative attention to nonlocal companies, especially in locations with fewer flights after the outbreak. Finally, local attention predicts volatility, bid-ask spreads and nonlocal attention, not vice versa. These findings are consistent with local investors having an information-processing advantage.
Author: Kewei Hou
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Book Description
We examine the role of investor attention in explaining the profitability of price and earnings momentum strategies. Using trading volume and market state to measure cross-sectional and time-series variations of investor attention, we find that price momentum profits are higher among high volume stocks and in up markets, but that earnings momentum profits are higher among low volume stocks and in down markets. In the long run, price momentum profits reverse but earnings momentum profits do not. These results suggest that price underreaction to earnings news weakens with investor attention, but price continuation caused by investors' overreaction strengthens with attention.
Author: Xian Li
Publisher:
ISBN:
Category :
Languages : en
Pages : 216
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Book Description
Author: Ragupathy Venkatachalam
Publisher: Springer Nature
ISBN: 3031152948
Category : Science
Languages : en
Pages : 331
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Book Description
This book presents frontier research on the use of computational methods to model complex interactions in economics and finance. Artificial Intelligence, Machine Learning and simulations offer effective means of analyzing and learning from large as well as new types of data. These computational tools have permeated various subfields of economics, finance, and also across different schools of economic thought. Through 16 chapters written by pioneers in economics, finance, computer science, psychology, complexity and statistics/econometrics, the book introduces their original research and presents the findings they have yielded. Theoretical and empirical studies featured in this book draw on a variety of approaches such as agent-based modeling, numerical simulations, computable economics, as well as employing tools from artificial intelligence and machine learning algorithms. The use of computational approaches to perform counterfactual thought experiments are also introduced, which help transcend the limits posed by traditional mathematical and statistical tools. The book also includes discussions on methodology, epistemology, history and issues concerning prediction, validation, and inference, all of which have become pertinent with the increasing use of computational approaches in economic analysis.
