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Retail Attention, Institutional Attention

Published online by Cambridge University Press:  12 August 2022

Hongqi Liu ,
Lin Peng Open the ORCID record for Lin Peng [Opens in a new window]  and
Yi Tang
Hongqi Liu
Affiliation:
School of Management and Economics, Chinese University of Hong Kong, Shenzhen [email protected]
Lin Peng*
Affiliation:
Baruch College/CUNY Zicklin School of Business
Yi Tang
Affiliation:
Fordham University Gabelli School of Business [email protected]
*
[email protected] (corresponding author)
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Abstract

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We document distinctly different clientele effects on investor attention and return responses to information. Macro news crowds out retail investor attention to firms’ earnings news by 49%. For stocks with high retail ownership, macro news dampens earnings announcement returns by 17% and substantially increases post-announcement drift, especially during high VIX periods. In contrast, macro news increases institutional investor attention to scheduled earnings announcements but not their attention to unscheduled analysts’ forecast revisions. The findings confirm the implications of rational inattention models and highlight the importance of considering clientele effects in understanding the effect of news on attention and asset prices.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 58 , Issue 3 , May 2023 , pp. 1005 - 1038
Copyright
© The Author(s), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

This article was previously circulated under the title “Investor Attention: Seasonal Patterns and Endogenous Allocations.” We thank an anonymous referee, Hendrik Bessembinder (the editor), Markus Brunnermeier, Han-Sheng Chen (discussant), Zhi Da (discussant), Xi Dong, Vita Faychuk (discussant), David Hirshleifer, Harrison Hong, Armen Hovakimian, Shiyang Huang, Yud Izhakian, Marcin Kacperczyk, Sonya Lim, Roger Loh, Atif Mian, Christopher Sims, Oleg Sokolinskiy, Siewhong Teoh, Paul Tetlock, Sheridan Titman, Laura Veldkamp, Baolian Wang, Jun Wang, Wei Xiong, Jing Zhao (discussant), Xin Zhou (discussant), and seminar participants at Baruch College, Columbia University, DePaul University, Drexel University, Princeton University, SUNY Stony Brook, UC Irvine, the 2015 Asian Bureau of Finance and Economic Research Conference, the 2015 China International Conference in Finance, the 2015 Financial Management Association Meetings, the 2016 Annual Conference on Financial Economics and Accounting, the 2016 MFA Annual Meeting, the 2018 FMA Asia Conference, and 2021 China Meeting of Econometric Society for helpful comments and suggestions. Lin Peng acknowledges the Krell research grant and the Wasserman research grant for financial support. All errors remain our own.

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