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Does Investor Attention Affect Trading Volume In The Brazilian Stock Market?

Heloisa Souza, Claudio Barbedo and Gustavo Araujo

No 472, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: Given the large amount of information available about companies and stocks, investors have to be selective about the information they process. This behavior is related to the attention effect, which comes from the natural human incapacity to process all existing information. The aim of this paper is to investigate the relationship between a proxy of attention effect, media coverage, and trading volume in the Brazilian stock market. Media coverage may attract unsophisticated investors. The results suggest that, in periods with high stock index level, there is a strong positive reaction of the trading volume on the same day of the news release in printed newspapers. Moreover, this relation occurs only if the news is negative for the firm. In addition, less visible companies in the media are more susceptible to the attention effect when news is more widespread.

Date: 2018-01
New Economics Papers: this item is included in nep-fmk and nep-lam
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