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Noise-driven abnormal institutional investor attention

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  • Feng Dong

    (Siena College)

Abstract

Market noises can lead to optimistic or pessimistic investor sentiments, which draw additional attention from irrational investors. Hence, when additional investor attention is misallocated on worthless information due to market noises, the consequential trading activities will raise stock mispricing and reduce equity market efficiency. In this research, I find a U-shape relation between stock sentiments and the abnormal stock returns driven by Noise-Based Abnormal Institutional Investor Attention (NBAIA). Specifically, an NBAIA event is more influential and generates a much higher (lower) abnormal return if the stock is associated with more positive (negative) sentiment during the event day. Such stock movements are temporary and are the outcome of interaction between investor attention and stock sentiment.

Suggested Citation

  • Feng Dong, 2020. "Noise-driven abnormal institutional investor attention," Journal of Asset Management, Palgrave Macmillan, vol. 21(5), pages 467-488, September.
    • Handle: RePEc:pal:assmgt:v:21:y:2020:i:5:d:10.1057_s41260-020-00171-4
    DOI: 10.1057/s41260-020-00171-4
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