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Stock return comovement when investors are distracted: More, and more homogeneous

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  • Ehrmann, Michael
  • Jansen, David-Jan

Abstract

We study how investors re-allocate attention when the opportunity cost of acquiring information suddenly increases. Using intraday data for more than 750 stocks in 19 countries, we find that investors who are distracted by FIFA World Cup soccer matches shift attention away from firm-specific and global news. When movements in global stock markets are large, pricing of global news reverts back to normal, but domestic firm-specific news keep being priced less, leading to increased comovement with the national market. This increase is stronger for stocks that normally comove less with the national market, leading to a convergence in betas across stocks.

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  • Ehrmann, Michael & Jansen, David-Jan, 2022. "Stock return comovement when investors are distracted: More, and more homogeneous," Journal of International Money and Finance, Elsevier, vol. 129(C).
    • Handle: RePEc:eee:jimfin:v:129:y:2022:i:c:s0261560622001450
    DOI: 10.1016/j.jimonfin.2022.102742
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    1. Wang, Jianxin, 2022. "Market distraction and near-zero daily volatility persistence," International Review of Financial Analysis, Elsevier, vol. 80(C).

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    More about this item

    Keywords

    Investor attention; Stock returns; Comovement; News;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • 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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