Limited investor attention and biased reactions to information: Evidence from the COVID-19 pandemic

Liao Xu, Xuan Zhang and Jing Zhao

Journal of Financial Markets, 2023, vol. 62, issue C

Abstract: We find that the COVID-19 pandemic increases (decreases) stock return sensitivity to market-wide (firm-specific) news, which is associated with return reversals (delayed reactions). These results are consistent with limited investor attention and investors paying heightened (reduced) attention to macro (micro) information after the outbreak. There are more biased reactions when the epidemic spread is higher, to good news than bad news, for firms headquartered in pandemic epicenters, and for larger stocks. We also find higher (lower) imbalanced trading, information flow, and price efficiency associated with market-wide (firm-specific) news during the pandemic.

Keywords: COVID-19 pandemic; Limited investor attention; Market reaction; Negativity bias; News release (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:62:y:2023:i:c:s1386418122000490

DOI: 10.1016/j.finmar.2022.100757

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