Market Returns and a Tale of Two Types of Attention

56 Pages Posted: 3 Apr 2020 Last revised: 28 Apr 2023

See all articles by Zhi Da

Zhi Da

University of Notre Dame - Mendoza College of Business

Jian Hua

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

Tim Chih-Ching Hung

National Taiwan University - Department of Finance

Lin Peng

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

Date Written: April 27, 2023

Abstract

Daily aggregate retail attention to stocks (ARA) negatively predicts the one-week-ahead market returns, whereas aggregate institutional attention (AIA) positively predicts market returns around scheduled major news announcements. The results are robust out of sample and are economically significant. ARA’s predictability is also stronger for illiquid stocks, while AIA’s predictability is higher for high-beta stocks. The findings suggest that attention-driven retail buying generates a transitory marketwide price pressure, whereas institutional attention precedes the resolution of aggregate uncertainty and the accrual of risk premiums.

Keywords: Return Predictability, Institutional Attention, Retail Attention, Macroeconomic Announcements, Announcement Premium

JEL Classification: G11, G12, G14, G4

Suggested Citation

Da, Zhi and Hua, Jian and Hung, Tim Chih-Ching and Peng, Lin, Market Returns and a Tale of Two Types of Attention (April 27, 2023). Available at SSRN: https://ssrn.com/abstract=3551662 or http://dx.doi.org/10.2139/ssrn.3551662

Zhi Da

University of Notre Dame - Mendoza College of Business ( email )

Notre Dame, IN 46556-5646
United States

Jian Hua

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

Tim Chih-Ching Hung

National Taiwan University - Department of Finance ( email )

1, Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

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

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