Review of Finance Vol. 26 No. 3 2022

Investor Attention and Asset Pricing Anomalies

Lei Jiang¹; Jinyu Liu²; Lin Peng³; Baolian Wang⁴

¹ School of Economics and Management, Tsinghua University · ² School of Banking and Finance, University of International Business and Economics · ³ Baruch College, City University of New York · ⁴ Warrington College of Business, University of Florida ,

Abstract

We investigate the relationship between investor attention and financial market anomalies. We find that anomaly returns tend to be higher following high-attention days. The result is robust after controlling for the effect of news and in a natural experiment setting in which a stock market regulation and rounding errors generate exogenous variations in attention. An analysis of order imbalances suggests that large traders trade on anomaly signals more aggressively upon observing higher attention. We discuss the extent to which the findings are driven by inattention-driven underreaction, bias amplification, or coordinated arbitrage mechanisms, thereby providing insight into the understanding of anomalies.

DOI

10.1093/rof/rfab032

Volume

26

Issue

3

Pages

563-593

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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