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Limited attention, salience of information and stock market activity

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  • Ramos, Sofia B.
  • Latoeiro, Pedro
  • Veiga, Helena

Abstract

It is now widely recognized in the literature that individuals have limited attention and that salient information plays a key role in individuals choices. We analyze the salience of two sources of information for investors: firm-specific and market. Salient information on firm and market levels is captured by 52-week highs and low indicators while investor attention is filtered by Google web searches. Results show that web searches is a predictor of volume, volatility and returns, and the effects are stronger when using market information. Our findings help to better understand the sources of information that lead individuals in making investment decisions.

Suggested Citation

  • Ramos, Sofia B. & Latoeiro, Pedro & Veiga, Helena, 2020. "Limited attention, salience of information and stock market activity," Economic Modelling, Elsevier, vol. 87(C), pages 92-108.
    • Handle: RePEc:eee:ecmode:v:87:y:2020:i:c:p:92-108
    DOI: 10.1016/j.econmod.2019.07.010
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    Cited by:

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    More about this item

    Keywords

    52-week high prices; Behavioral finance; Google search volume index; Investor attention; Predictability; Salience;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • 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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