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Market-Wide Attention, Trading, and Stock Returns

44 Pages Posted: 17 Mar 2008 Last revised: 20 May 2015

Yu Yuan

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF); University of Pennsylvania - Wharton Financial Institutions Center

Date Written: February 24, 2015

Abstract

Market-wide attention-grabbing events -- record levels for the Dow and front-page articles about the stock market -- predict the trading behavior of investors and, in turn, market returns. Both aggregate and household-level data reveal that high market-wide attention events lead investors to sell their stock holdings dramatically when the level of the stock market is high. Such aggressive selling has a negative impact on market prices, reducing market returns by 19 basis points on days following attention-grabbing events.

Keywords: Attention, Individual investor, Trading

JEL Classification: G14

Suggested Citation

Yuan, Yu, Market-Wide Attention, Trading, and Stock Returns (February 24, 2015). Journal of Financial Economics (JFE), Volume 116, Issue 3, June 2015, Pages 548–564.. Available at SSRN: https://ssrn.com/abstract=1105532 or http://dx.doi.org/10.2139/ssrn.1105532

Yu Yuan (Contact Author)

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )

Shanghai Jiao Tong University
211 West Huaihai Road
Shanghai, 200030
China

University of Pennsylvania - Wharton Financial Institutions Center

3733 Spruce Street
Philadelphia, PA 19104-6374
United States

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