The asymmetric effect of retail investor attention: new evidence from post-recommendation revision drift

Rui Huang, Xing Chen and Chongfeng Wu

Applied Economics, 2024, vol. 56, issue 56, 7501-7516

Abstract: This paper investigates the effect of retail investor attention on market reaction following analysts’ recommendation revisions in the Chinese stock market. The results suggest that the impact of retail attention on post-recommendation revision drift is asymmetric. Specifically, retail attention mitigates post-upgrade announcement drift, whereas it aggravates post-downgrade drift. After a series of arrangements to address the potential endogeneity concerns and ensure robustness, the results still hold. Moreover, we reveal retail attention facilitates the absorption of individual firms’ information and increases liquidity to attenuate post-upgrade drift, whereas retail attention induces underreaction due to short-sale restrictions and disposition effects regarding stronger post-downgrade drifts. The results of the additional heterogeneity test provide further evidence of channel tests and reveal that prior positive sentiment can accelerate the integration of good news into stock prices. These findings enrich the existing literature on retail investors’ role in the price discovery process following the release of fundamental information.

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2023.2287557 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:56:y:2024:i:56:p:7501-7516

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2023.2287557

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().