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Does investor attention matter for market anomalies?

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  • Nguyen, Hung T.
  • Pham, Mia Hang

Abstract

This paper examines the relation between investor attention and stock market anomalies in the US stock market. We find anomalies are stronger following high rather than low attention periods. Returns on the long–short strategy based on a composite mispricing score during high attention months are 2.25 times higher than those during low attention periods. The results are consistent with the notion that high levels of attention can exacerbate investor overreaction to irrelevant information. Mispricing is then corrected, leading to increased anomaly returns following high attention periods.

Suggested Citation

  • Nguyen, Hung T. & Pham, Mia Hang, 2021. "Does investor attention matter for market anomalies?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).
    • Handle: RePEc:eee:beexfi:v:29:y:2021:i:c:s2214635020303804
    DOI: 10.1016/j.jbef.2020.100451
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    Cited by:

    1. Li, Changgui & Liu, Xiaowen & Hou, Zhiping & Li, Yongyi, 2023. "Retail investor attention and equity mispricing: The mediating role of earnings management," Finance Research Letters, Elsevier, vol. 53(C).
    2. Chen, Zhongdong & Schmidt, Adam & Wang, Jin’ai, 2021. "Retail investor risk-seeking, attention, and the January effect," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    3. Pham, Linh & Cepni, Oguzhan, 2022. "Extreme directional spillovers between investor attention and green bond markets," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 186-210.
    4. Ahmad, Fawad & Oriani, Raffaele, 2022. "Investor attention, information acquisition, and value premium: A mispricing perspective," International Review of Financial Analysis, Elsevier, vol. 79(C).

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    More about this item

    Keywords

    Investor attention; Market anomalies; Mispricing;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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