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Information shocks and short-term market overreaction: The role of investor attention

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  • Meng, Yongqiang
  • Li, Xiao
  • Xiong, Xiong

Abstract

Employing jumps in stock return as a proxy for information shocks, we empirically discover the short-term overaction in the Chinese stock market. Trading strategies short (long) stocks with the largest (smallest) lagged cumulative jump returns earn sizable positive returns. Besides, the information shocks exhibit significant predictive ability for future returns. The market overreaction is robust to firm characteristics, subperiod analysis, and intraday analysis. Investor attention facilitates this short-term market overreaction.

Suggested Citation

  • Meng, Yongqiang & Li, Xiao & Xiong, Xiong, 2024. "Information shocks and short-term market overreaction: The role of investor attention," International Review of Financial Analysis, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:finana:v:93:y:2024:i:c:s1057521924001510
    DOI: 10.1016/j.irfa.2024.103219
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    More about this item

    Keywords

    Jumps; Information shocks; Market overreactions; Investor attention;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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