Investor Attention and Asset Pricing Anomalies

62 Pages Posted: 17 Aug 2019 Last revised: 30 Aug 2021

See all articles by Lei Jiang

Lei Jiang

Tsinghua University

Jinyu Liu

University of International Business and Economics (UIBE) - School of Banking and Finance

Lin Peng

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

Baolian Wang

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

Date Written: August 30, 2021

Abstract

We investigate the relationship between investor attention and financial market anomalies. We find that anomaly returns tend to be higher following high-attention days. The result is robust after controlling for the effect of news and in a natural experiment setting in which a stock market regulation and rounding errors generate exogenous variations in attention. An analysis of order imbalances suggests that large traders trade on anomaly signals more aggressively upon observing higher attention. We discuss the extent to which the findings are driven by inattention-driven underreaction, bias amplification, or coordinated arbitrage mechanisms, thereby providing insight into the understanding of anomalies.

Keywords: investor attention; anomaly; price limit; coordination; synchronicity risk

JEL Classification: G12; G15; G40

Suggested Citation

Jiang, Lei and Liu, Jinyu and Peng, Lin and Wang, Baolian, Investor Attention and Asset Pricing Anomalies (August 30, 2021). Baruch College Zicklin School of Business Research Paper No. 2019-08-04, Available at SSRN: https://ssrn.com/abstract=3437527 or http://dx.doi.org/10.2139/ssrn.3437527

Lei Jiang

Tsinghua University ( email )

Beijing, 100084
China

Jinyu Liu

University of International Business and Economics (UIBE) - School of Banking and Finance ( email )

No.10, Huixindong Street, Chaoyang District
Beijing, 100029
China
+8613720001753 (Phone)

HOME PAGE: http://mzttd.club/liujinyu.html

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

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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