Aerospace competition, investor attention, and stock return comovement

Hung X. Do, Nhut H. Nguyen, Quan M.P. Nguyen and Cameron Truong

Journal of Economic Behavior & Organization, 2023, vol. 215, issue C, 40-59

Abstract: Fierce aerospace competition among global superpowers has resulted in strong public attention on satellite launch events in the U.S. Given limited attentional resources, U.S. investors pay more attention to market-level shocks than to firm-specific shocks, making stock returns comove more with the market on satellite launch days than on other days. We find that the effect is significantly stronger for military-related satellite launches, launches before the dissolution of the former Soviet Union, and international satellite launches by other competitors, highlighting a greater concern for national security. A trading strategy that exploits the potential satellite-induced mispricing yields an annualized abnormal risk-adjusted return of up to 17% within the three-day window around launch date. Our results are robust to a battery of robustness analyses that consider the different characteristics of satellite launches, the exclusion of aerospace firms, and stock return comovement with industries.

Keywords: Investor attention; Comovement; Satellite (search for similar items in EconPapers)
JEL-codes: G10 G14 G32 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:215:y:2023:i:c:p:40-59

DOI: 10.1016/j.jebo.2023.09.005

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