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The Comovement of Investor Attention

Author

Listed:
  • Michael S. Drake

    (Brigham Young University, Provo, Utah 84602)

  • Jared Jennings

    (Washington University in St. Louis, St. Louis, Missouri 63130)

  • Darren T. Roulstone

    (Ohio State University, Columbus, Ohio 43210)

  • Jacob R. Thornock

    (Brigham Young University, Provo, Utah 84602)

Abstract

Prior literature has documented that investor attention and constraints on that attention are associated with the pricing of stocks. We introduce the concept of attention comovement, which is the extent to which investor attention to a firm is explained by attention paid to the firm’s industry and the market in general. We find that attention comovement is nontrivial for the average firm and is related to firm characteristics, such as size and visibility. We also find that the comovement of investor attention has market consequences, in that it is positively associated with excess stock return comovement. Finally, we show that a firm’s earnings announcement contributes to the transfer of attention from one firm to its peer firms. Our results provide insights about the information flows underlying return comovement and aid in understanding the micro and macronature of investor attention.

Suggested Citation

  • Michael S. Drake & Jared Jennings & Darren T. Roulstone & Jacob R. Thornock, 2017. "The Comovement of Investor Attention," Management Science, INFORMS, vol. 63(9), pages 2847-2867, September.
    • Handle: RePEc:inm:ormnsc:v:63:y:2017:i:9:p:2847-2867
    DOI: 10.1287/mnsc.2016.2477
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    References listed on IDEAS

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