Retail Attention, Institutional Attention

61 Pages Posted: 6 May 2019 Last revised: 11 Jan 2020

See all articles by Hongqi Liu

Hongqi Liu

Chinese University of Hong Kong, Shenzhen

Lin Peng

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

Yi Tang

Fordham University - Gabelli School of Business

Date Written: April 12, 2019

Abstract

Using direct investor attention proxies, we show that constrained investors follow a pecking order in allocating attention. While retail investors are attentive to both macroeconomic news and individual firms’ earnings announcements, macroeconomic news crowds out attention to earnings by 28.8%. Institutional attention is less constrained and exhibits no crowding-out effect. The lack of retail attention lowers the earnings announcement return responses by 15.8%, even when institutions are attentive. For high-retail-ownership stocks, macro news dampens earnings responses by 9.9%, especially when VIX is high. The findings suggest that the relative importance of retail vis-à-vis institutional investors affects equilibrium prices.

Keywords: Attention, retail investors, institutional investors, pecking order, crowding-out effect

JEL Classification: G10, G11, G12, G14

Suggested Citation

Liu, Hongqi and Peng, Lin and Tang, Yi, Retail Attention, Institutional Attention (April 12, 2019). Baruch College Zicklin School of Business Research Paper No. 2019-05-03. Available at SSRN: https://ssrn.com/abstract=3370683 or http://dx.doi.org/10.2139/ssrn.3370683

Hongqi Liu

Chinese University of Hong Kong, Shenzhen ( email )

Lin Peng (Contact Author)

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

Yi Tang

Fordham University - Gabelli School of Business ( email )

113 West 60th Street
New York, NY 10023
United States

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