Investor attention factors and stock returns: Evidence from China

Dayong Dong, Keke Wu, Jianchun Fang, Giray Gözgör and Cheng Yan

Journal of International Financial Markets, Institutions and Money, 2022, vol. 77, issue C

Abstract: We provide a theoretical model in which investor attention affects the cross-section of equity returns. Based on the reaction of three types of investors to market signals, we derive a negative (positive) correlation between the proportion of continuous attentive (new attentive) investors and stock returns. We also provide empirical support for the model by constructing two asset pricing factors that capture both the level and change in investor attention. We assess their ability to explain the cross-section of equity returns in China's stock market. Our attention-augmented models outperform baseline models in explaining a broad range of return anomalies.

Keywords: Investor attention; Equity returns; Factor; Anomaly; China (search for similar items in EconPapers)
JEL-codes: G02 G12 G14 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:77:y:2022:i:c:s1042443121002031

DOI: 10.1016/j.intfin.2021.101499

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