Investor Attention and Asset Pricing Anomalies*

Synchronization risk and delayed arbitrage

Lei Jiang, Jinyu Liu, Lin Peng and Baolian Wang

Review of Finance, 2022, vol. 26, issue 3, 563-593

Abstract: We investigate the relationship between investor attention and financial market anomalies. We find that anomaly returns tend to be higher following high-attention days. The result is robust after controlling for the effect of news and in a natural experiment setting in which a stock market regulation and rounding errors generate exogenous variations in attention. An analysis of order imbalances suggests that large traders trade on anomaly signals more aggressively upon observing higher attention. We discuss the extent to which the findings are driven by inattention-driven underreaction, bias amplification, or coordinated arbitrage mechanisms, thereby providing insight into the understanding of anomalies.

Keywords: Investor attention; Anomaly; Price limit; Coordination; Synchronicity risk (search for similar items in EconPapers)
JEL-codes: G12 G15 G40 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:revfin:v:26:y:2022:i:3:p:563-593.

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