Ranking and Salience

46 Pages Posted: 27 Feb 2017 Last revised: 30 Mar 2017

See all articles by Baolian Wang

Baolian Wang

University of Florida - Department of Finance, Insurance and Real Estate

Date Written: March 29, 2017

Abstract

We investigate the economic consequences of stock ranking using a novel natural experiment in which stock ranking is due to the rounding of stock prices. The results show that ranking a stock in a more salient place can increase its return volatility, trading volume, liquidity, and cause higher short-term stock returns and an eventual reversal. Ranking only matters when it affects investor attention. The ranking effect is stronger when more stocks are on the list. Further, small investors are more affected by ranking. Overall, the evidence shows that uninformed ranking can cause correlated investor trading and have significant economic consequences.

Keywords: ranking; investor attention; overreaction; volatility; volume

JEL Classification: G12, G14, D03

Suggested Citation

Wang, Baolian, Ranking and Salience (March 29, 2017). Available at SSRN: https://ssrn.com/abstract=2922350 or http://dx.doi.org/10.2139/ssrn.2922350

Baolian Wang (Contact Author)

University of Florida - Department of Finance, Insurance and Real Estate ( email )

314 Stuzin Hall
Gainesville, FL 32611
United States

HOME PAGE: http://www.wangbaolian.com

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