 Investor attention, index performance, and return predictabilityNadia Vozlyublennaia Journal of Banking & Finance, 2014, vol. 41, issue C, 17-35 Abstract: We investigate a link between the performance of several security indexes in broad investment categories and investor attention as measured by Google search probability. We find that there is a significant short-term change in index returns following an increase in attention. Conversely, a shock to returns leads to a long-term change in attention. Given this evidence, we hypothesize that a change in index return or the sign of its return in the past can indicate the nature of the information that investors are paying attention to. Therefore, past returns should determine the impact of attention on the future returns and volatility. Indeed, we find significant interaction effects between lagged returns and attention. This result suggests that attention can alter predictability of index returns. Specifically, we demonstrate that increased investor attention diminishes return predictability and, therefore, improves market efficiency. Keywords: Investor attention; Google search probability; Security index; Asset returns; VAR (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:jbfina:v:41:y:2014:i:c:p:17-35 DOI: 10.1016/j.jbankfin.2013.12.010 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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