Attention Spillover in Asset Pricing

49 Pages Posted: 4 Dec 2020 Last revised: 20 Feb 2021

See all articles by Xin Chen

Xin Chen

Southwestern University of Finance and Economics (SWUFE) - School of Finance; Shenzhen University WeBank Institute of Fintech

Li An

Tsinghua University - PBC School of Finance

Zhengwei Wang

Tsinghua University - PBC School of Finance

Jianfeng Yu

Tsinghua University - PBC School of Finance

Date Written: September 28, 2020

Abstract

Exploiting a screen display feature whereby the order of stock display is determined by the stock listing codes, we lever a novel identification strategy and study the impact of attention spillover on stock prices and turnover. We find that stocks with neighbors on the display that experience higher returns in the past two weeks are associated with higher returns and turnover in the future week, after adjusting for a battery of risk and characteristic benchmarks. This finding is consistent with our conjectures that investors (a) tend to trade more after positive investment experience, and (b) are more likely to pay attention to neighboring stocks. Both conjectures are confirmed using trading data. We further sharpen the identification using a quasi-natural experiment in which the screen display for affected stocks is exogenously changed.

Keywords: limited attention, overconfidence, attention spillover, price impact, return predictability

JEL Classification: G11, G12, G41

Suggested Citation

Chen, Xin and Chen, Xin and An, Li and Wang, Zhengwei and Yu, Jianfeng, Attention Spillover in Asset Pricing (September 28, 2020). Available at SSRN: https://ssrn.com/abstract=3716918 or http://dx.doi.org/10.2139/ssrn.3716918

Xin Chen (Contact Author)

Shenzhen University WeBank Institute of Fintech ( email )

Southwestern University of Finance and Economics (SWUFE) - School of Finance ( email )

Chengdu, 610074
China

Li An

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

Zhengwei Wang

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing 100083
China

Jianfeng Yu

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

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