Stakes and Investor Behaviors

Investor attention and stock price efficiency: Evidence from quasi‐natural experiments in China

“…Consistent with the fact that attention is a limited resource, prior empirical studies illustrate that investors focus more on attention‐grabbing stocks (Barber & Odean, 2008) and their familiar stocks (Huberman, 2001). Furthermore, differences in the amount of attention given to firms have been shown to explain differences in stock prices (Chemmanur & Yan, 2019; Gervais et al., 2001; Kumar et al., 2021; Lou, 2014), stock liquidity (Grullon et al., 2004), price momentum (Hou et al., 2009), stock recommendation draft (Loh, 2010), firm valuation (Bae & Wang, 2012), stock return volatility (Andrei & Hasler, 2015), anomaly returns (Bali et al., 2021; Chen et al., 2022; Jiang et al., 2022), insider trading (Mansi et al., 2022), market returns (Da et al., 2022), spillover effects (An et al., 2022; Guo et al., 2022), investor trading and behavior bias (Frydman & Wang, 2020; Sui & Wang, 2022) and so on.…”

“…Second, our study belongs to a growing body of literature shedding light on how investor attention affects their trading behavior and thus asset returns (e.g., An et al., 2022; Andrei & Hasler, 2015, 2020; Barber & Odean, 2008; Frydman & Wang, 2020; Hirshleifer & Teoh, 2003; Huang & Liu, 2007; Jiang et al., 2022; Mansi et al., 2022; Peng, 2005; Peng & Xiong, 2006; Sims, 2003; Sui & Wang, 2022; Wang, 2017, among many others). We find that increased investor attention triggered by salient events but not informative fundamental signals brings immediate liquidity increase as well as net inflows from large orders to stocks, and helps increase short‐term stock price efficiency.…”