It Depends on Where You Search: Institutional Investor Attention and Under-Reaction to News

We propose a direct measure of abnormal institutional investor attention (AIA) using news searching and news reading activity for specific stocks on Bloomberg terminals. AIA is highly correlated with institutional trading measures and related to, but different from, other investor attention proxies. Contrasting AIA with retail attention measured using Google search activity, we find that institutional attention responds more quickly to major news events, leads retail attention, and facilitates permanent price adjustment. The well documented price drifts following both earnings announcements and analyst recommendation changes are driven by announcements where institutional investors fail to pay sufficient attention.

Keywords: attention, institutional investors, retail investors, earnings announcements, analyst recommendations, news, Bloomberg

JEL Classification: G10, G14, D83

Suggested Citation: Suggested Citation

Ben-Rephael, Azi and Da, Zhi and Israelsen, Ryan D., It Depends on Where You Search: Institutional Investor Attention and Under-Reaction to News (November 19, 2016). Kelley School of Business Research Paper No. 15-82, Available at SSRN: https://ssrn.com/abstract=2692181 or http://dx.doi.org/10.2139/ssrn.2692181