Joint News, Attention Spillover, and Market Returns

70 Pages Posted: 7 Mar 2017 Last revised: 23 May 2022

See all articles by Li Guo

Li Guo

Fudan University - School of Economics; Shanghai Institute of International Finance and Economics

Lin Peng

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Yubo Tao

University of Macau - Department of Economics; University of Macau - Asia-Pacific Academy of Economics and Management

Jun Tu

Singapore Management University - Lee Kong Chian School of Business

Date Written: May 13, 2022

Abstract

We analyze over 2.6 million news articles and propose a novel measure of aggregate joint news coverage of firms. The measure strongly and negatively predicts market returns, both in sample and out of sample. The relation is causal, robust to existing predictors, and is especially strong when market uncertainty is high or when market frictions are large. Using data on EDGAR downloads by unique IPs, we provide direct evidence that joint news triggers attention spillover across firms. Our results are consistent with the explanation that joint news generates a contagion in investor attention and causes marketwide overvaluations and subsequent reversals.

Keywords: News, Attention spillover, Contagion, Investor base, EDGAR search, Return predictability.

JEL Classification: G11, G12, G41

Suggested Citation

Guo, Li and Peng, Lin and Tao, Yubo and Tu, Jun, Joint News, Attention Spillover, and Market Returns (May 13, 2022). Available at SSRN: https://ssrn.com/abstract=2927561 or http://dx.doi.org/10.2139/ssrn.2927561

Li Guo

Fudan University - School of Economics ( email )

600 GuoQuan Road
Shanghai, 200433
China

Shanghai Institute of International Finance and Economics ( email )

777 Guoding Rd
Wu Jiao Chang, Yangpu District
Shanghai, Shanghai 200017
China

Lin Peng

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

17 Lexington Avenue
New York, NY 10010
United States

Yubo Tao (Contact Author)

University of Macau - Department of Economics ( email )

Avenida da Universidade
Taipa
Macao SAR, 999078
China

HOME PAGE: http://https://sites.google.com/site/ybtao1990/home

University of Macau - Asia-Pacific Academy of Economics and Management ( email )

Avenida da Universidade
Taipa
Macao SAR, 999078
China

Jun Tu

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
#04-01
Singapore, 178899
Singapore

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