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Investor Attention and Stock Liquidity in the Chinese Market

Author

Listed:
  • Weihan Zhao

    (Wenzhou-Kean University)

  • Jianing Zhang

    (Wenzhou-Kean University
    Wenzhou-Kean University
    Wenzhou-Kean University)

Abstract

With the advancement of science and technology and the popularization of the internet, information resources have become more and more abundant, but the attention of investors has become relatively scarce. In the face of surplus information resources, how investors allocate their attention will affect investors’ decision making. This study examines the dynamic relationship between investors’ attention and China’s stock market liquidity, utilizing weekly data based on the component stocks of the Shenzhen Stock Exchange 100 Index in China from January 1, 2018, to December 31, 2020. The analysis reveals that investors’ attention, measured by the Google Trends search volume index, negatively affects future stock liquidity. Moreover, a long-term cointegration relationship exists between investor attention and stock liquidity. The negative relationship between investor attention and stock liquidity is robust for an alternative liquidity measure using a stock fixed-effects model. The inverse correlation between investor attention and stock liquidity was more potent before the coronavirus disease 2019 pandemic and weakened amid the pandemic. The findings in this paper can enrich the standard of investors’ investment decisions and help investors make objective, rational, and scientific investment decisions.

Suggested Citation

  • Weihan Zhao & Jianing Zhang, 2024. "Investor Attention and Stock Liquidity in the Chinese Market," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 30(1), pages 65-82, February.
    • Handle: RePEc:kap:iaecre:v:30:y:2024:i:1:d:10.1007_s11294-024-09885-2
    DOI: 10.1007/s11294-024-09885-2
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    References listed on IDEAS

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