Investor Attention, Information Diffusion and Industry Returns

14 Pages Posted: 23 Aug 2010 Last revised: 23 Aug 2015

See all articles by Qiongbing Wu

Qiongbing Wu

Western Sydney University

Abul Shamsuddin

University of Newcastle (Australia) - Newcastle Business School

Multiple version iconThere are 2 versions of this paper

Date Written: July 4, 2013

Abstract

Using the monthly data for more than 1700 Australian stocks over the period from 1990 to 2009, we investigate whether industry portfolio returns predict the aggregate market. We find that a few industries significantly lead the market even controlling for well-recognized market predictors. However, unlike U.S. studies, we do not find that the ability of an industry to predict the market is closely related to its propensity to forecast economic growth. Instead, we find that the capacity of an industry to lead the market is significantly moderated by proxies for investor attention. In general, more neglected industries are more informative in leading the markets due to delayed investor attention to the information content of these industries; and the information contained in industry portfolio returns is incorporated into the market return more slowly during economic recession when investors pay less attention to the stock markets. Our research provides new empirical evidence in support of the gradual information hypothesis from a market alternative to the U.S. ones.

Keywords: Market Efficiency, Information Diffusion, Investor Attention, Industry Returns.

JEL Classification: G12, G14, E32, E44

Suggested Citation

Wu, Qiongbing and Shamsuddin, Abul, Investor Attention, Information Diffusion and Industry Returns (July 4, 2013). 23rd Australasian Finance and Banking Conference 2010 Paper. Available at SSRN: https://ssrn.com/abstract=1663732 or http://dx.doi.org/10.2139/ssrn.1663732

Qiongbing Wu (Contact Author)

Western Sydney University ( email )

Locked Bag 1797
Penrith South DC, NSW 2751
Australia
+61-2-96859805 (Phone)
+61-2-96859105 (Fax)

HOME PAGE: http://www.uws.edu.au/staff_profiles/uws_profiles/doctor_linda_wu

Abul Shamsuddin

University of Newcastle (Australia) - Newcastle Business School ( email )

City Campus East – 231
Callaghan, NSW 2308
Australia

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