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Distraction effects on stock return co-movements: Confirmation from the Shenzhen and Shanghai stock markets

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  • Zhaunerchyk, Katsiaryna
  • Haghighi, Afshin
  • Oliver, Barry

Abstract

This study replicates a key part of the paper by Huang et al. (2019) using the original framework and examines the findings in an alternative stock market. Huang et al. (2019) document that, on days with attention shocks driven by major jackpot lottery drawings, stock return co-movement increases in the Taiwan stock market. They suggest that in distraction events, due to limited cognitive capacity to allocate attention, inventors shift their focus of attention from firm-specific information to broader market-specific information. This leads to higher stock return co-movement. Our study aims to test the reproducibility of the empirical framework presented by Huang et al. (2019) and the robustness of the reported results in the Shenzhen and Shanghai stock markets. The results confirm the original paper's finding of increased stock return co-movement on high distraction days and provide similar results in the Shenzhen and Shanghai stock markets (together as well as separately).

Suggested Citation

  • Zhaunerchyk, Katsiaryna & Haghighi, Afshin & Oliver, Barry, 2020. "Distraction effects on stock return co-movements: Confirmation from the Shenzhen and Shanghai stock markets," Pacific-Basin Finance Journal, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:pacfin:v:61:y:2020:i:c:s0927538x19305815
    DOI: 10.1016/j.pacfin.2020.101301
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    References listed on IDEAS

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    1. Veldkamp, Laura & Wolfers, Justin, 2007. "Aggregate shocks or aggregate information? Costly information and business cycle comovement," Journal of Monetary Economics, Elsevier, vol. 54(Supplemen), pages 37-55, September.
    2. Thomas J. Chemmanur & An Yan, 2019. "Advertising, Attention, and Stock Returns," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 9(03), pages 1-51, September.
    3. repec:bla:jfinan:v:59:y:2004:i:1:p:65-105 is not listed on IDEAS
    4. Laura L. Veldkamp, 2006. "Information Markets and the Comovement of Asset Prices," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(3), pages 823-845.
    5. Peng, Lin & Xiong, Wei, 2006. "Investor attention, overconfidence and category learning," Journal of Financial Economics, Elsevier, vol. 80(3), pages 563-602, June.
    6. Huang, Shiyang & Huang, Yulin & Lin, Tse-Chun, 2019. "Attention allocation and return co-movement: Evidence from repeated natural experiments," Journal of Financial Economics, Elsevier, vol. 132(2), pages 369-383.
    7. Choi, Sujung & Choi, Woon Youl, 2019. "Effects of limited attention on investors' trading behavior: Evidence from online ranking data," Pacific-Basin Finance Journal, Elsevier, vol. 56(C), pages 273-289.
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    Cited by:

    1. Kou, Shubo & Ma, Xiyuan, 2024. "From Gambling to Gaming: The Crowding Out Effect," Finance Research Letters, Elsevier, vol. 59(C).
    2. Li, Yue & Goodell, John W. & Shen, Dehua, 2021. "Comparing search-engine and social-media attentions in finance research: Evidence from cryptocurrencies," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 723-746.
    3. Hu, Yitong & Li, Xiao & Goodell, John W. & Shen, Dehua, 2021. "Investor attention shocks and stock co-movement: Substitution or reinforcement?," International Review of Financial Analysis, Elsevier, vol. 73(C).
    4. Corbet, Shaen & Goodell, John W., 2022. "The reputational contagion effects of ransomware attacks," Finance Research Letters, Elsevier, vol. 47(PB).
    5. 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).

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