 Effects of limited attention on investors' trading behavior: Evidence from online ranking dataSujung Choi and Woon Youl Choi Pacific-Basin Finance Journal, 2019, vol. 56, issue C, 273-289 Abstract: In this study, we provide empirical evidence that investors' limited attention affects security prices and trading volume in the short run. Using a unique dataset that was hand-collected from an Internet portal in Korea, we directly measure investor attention on individual stocks based on the rank information of the top 30 most frequently discussed stocks on the online stock message board. Investor attention is associated with significant increases in abnormal trading volume on the day that a stock is actively discussed online. Interestingly, less sophisticated individual investors continue buying more attention-grabbing stocks for a week after the active discussions of those stocks. Regarding stock return performance, whether investors are attentive to a stock significantly predicts next-day stock performance. However, the effect of attention on the stock returns is short-lived and disappears within two days, implying that the increase in stock prices is related to a behavioral bias rather than fundamental information. Keywords: Limited attention; Individual investors; Ranking data; Attention-grabbing stocks; Return performance; Abnormal trading volume (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:56:y:2019:i:c:p:273-289 DOI: 10.1016/j.pacfin.2019.06.007 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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