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Conference Paper: Attention allocation and return co-movement: evidence from repeated natural experiments

TitleAttention allocation and return co-movement: evidence from repeated natural experiments
Authors
KeywordsLimited attention
Attention allocation
Return co-movement
Earnings surprises
Issue Date2016
Citation
The 14th Annual Conference of the China International Conference in Finance (CICF), Xiamen, China, 7-10 July 2016. How to Cite?
AbstractWe study how attention allocation affects the composition of market/industry and firm-specific information in stock prices via repeated natural experiments. Using large jackpots of Taiwanese nationwide lotteries as exogenous shocks to investors’ attention, we find: (1) individual stock returns co-move more with the market/industry returns on large jackpot days; (2) large jackpots have stronger effects on stock returns’ co-movement with the market than with the industry; (3) the effect of large jackpots on return co-movement is stronger for stocks preferred by retail investors; and (4) the market under-reacts to firms’ earnings surprises on large jackpot days and reverts within one week. Our findings are consistent with the existing theory that attention-constrained investors focus more on market- and sector-level information than on firm-specific information.
Persistent Identifierhttp://hdl.handle.net/10722/233166

 

DC FieldValueLanguage
dc.contributor.authorHuang, S-
dc.contributor.authorHuang, Y-
dc.contributor.authorLin, TC-
dc.date.accessioned2016-09-20T05:35:00Z-
dc.date.available2016-09-20T05:35:00Z-
dc.date.issued2016-
dc.identifier.citationThe 14th Annual Conference of the China International Conference in Finance (CICF), Xiamen, China, 7-10 July 2016.-
dc.identifier.urihttp://hdl.handle.net/10722/233166-
dc.description.abstractWe study how attention allocation affects the composition of market/industry and firm-specific information in stock prices via repeated natural experiments. Using large jackpots of Taiwanese nationwide lotteries as exogenous shocks to investors’ attention, we find: (1) individual stock returns co-move more with the market/industry returns on large jackpot days; (2) large jackpots have stronger effects on stock returns’ co-movement with the market than with the industry; (3) the effect of large jackpots on return co-movement is stronger for stocks preferred by retail investors; and (4) the market under-reacts to firms’ earnings surprises on large jackpot days and reverts within one week. Our findings are consistent with the existing theory that attention-constrained investors focus more on market- and sector-level information than on firm-specific information.-
dc.languageeng-
dc.relation.ispartofAnnual Conference of the China International Conference in Finance, CICF 2016-
dc.relation.ispartof2016中国金融际年会-
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.subjectLimited attention-
dc.subjectAttention allocation-
dc.subjectReturn co-movement-
dc.subjectEarnings surprises-
dc.titleAttention allocation and return co-movement: evidence from repeated natural experiments-
dc.typeConference_Paper-
dc.identifier.emailHuang, S: huangsy@hku.hk-
dc.identifier.emailLin, TC: chunlin@hku.hk-
dc.identifier.authorityHuang, S=rp02052-
dc.identifier.authorityLin, TC=rp01077-
dc.description.naturepostprint-
dc.identifier.hkuros263266-

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