Abstract

http://ssrn.com/abstract=1772821
 
 

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Asymmetric Attention and Stock Returns


Jordi Mondria


University of Toronto - Department of Economics

Thomas Wu


University of California, Santa Cruz - Department of Economics

January 28, 2011

AFA 2012 Chicago Meetings Paper

Abstract:     
We study the asset pricing implications of attention allocation theories. These theories allow us to predict the arrival of private information by observing investors' behavior. Specifically, attention allocation theories suggest that the arrival of private news to local investors lead to an increase in asymmetric attention to stocks between local and nonlocal investors. We construct a measure of asymmetric attention based on aggregate search volume in Google. We find that firms receiving an increase in asymmetric attention earn higher returns, even after controlling for size, book-to-market, momentum and liquidity factors. We find this effect to be stronger among illiquid stocks and stocks headquartered in remote locations. Our results provide direct support for attention allocation theories.

Number of Pages in PDF File: 31

Keywords: Attention Allocation, Asymmetric Information, Stock Returns, Geography

JEL Classification: G12, G14, D82

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Date posted: March 1, 2011 ; Last revised: June 5, 2011

Suggested Citation

Mondria, Jordi and Wu, Thomas, Asymmetric Attention and Stock Returns (January 28, 2011). AFA 2012 Chicago Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1772821 or http://dx.doi.org/10.2139/ssrn.1772821

Contact Information

Jordi Mondria (Contact Author)
University of Toronto - Department of Economics ( email )
150 St. George Street
Toronto, Ontario M5S 3G7
Canada
1-416-978-1494 (Phone)
HOME PAGE: http://individual.utoronto.ca/jmondria/
Thomas Wu
University of California, Santa Cruz - Department of Economics ( email )
Santa Cruz, CA 95064
United States
831-459-4453 (Phone)
931-459-5077 (Fax)
Feedback to SSRN


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