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Investor co-attention and stock return co-movement: Evidence from China’s A-share stock market

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  • Su, Fei
  • Wang, Xinyi

Abstract

This study attempts to link investor co-attention to stock return co-movement in China's A-share stock market. On the one hand, stock price will co-move for stocks within the same industry and within the same market, which is labelled “return co-movement”. On the other hand, investor attention will also co-move as investors systematically search for relevant information for stocks of similar characteristics or as the stocks experience common information shocks, which is termed “investor co-attention”. The empirical evidence suggests that stock return co-movement can be explained by investor co-attention to a great extent, even after controlling for stock fundamentals and firm characteristics, and this effect is more salient for stocks with lower institutional ownership. Moreover, we employ large national lottery jackpots as exogenous shocks to investor attention. The empirical findings show that the co-movement of both investor attention and stock return increase on large lottery jackpot days, while investor co-attention contributes less to return co-movement on large lottery jackpot days. In summary, we offer an alternative explanation for return co-movement by observing the causal relationship between investor co-attention and stock return co-movement.

Suggested Citation

  • Su, Fei & Wang, Xinyi, 2021. "Investor co-attention and stock return co-movement: Evidence from China’s A-share stock market," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
  • Handle: RePEc:eee:ecofin:v:58:y:2021:i:c:s1062940821001583
    DOI: 10.1016/j.najef.2021.101548
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    2. Deng, Chao & Zhou, Xiaoying & Peng, Cheng & Zhu, Huiming, 2022. "Going green: Insight from asymmetric risk spillover between investor attention and pro-environmental investment," Finance Research Letters, Elsevier, vol. 47(PA).

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    More about this item

    Keywords

    Limited attention; Investor co-attention; Return co-movement; Stock market;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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