Losing sight of the trees for the forest? Attention allocation and anomalies

Jacobs, Heiko ; Weber, Martin

DOI: https://doi.org/10.1080/14697688.2016.1169311
URL: https://www.tandfonline.com/doi/full/10.1080/14697...
Additional URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_i...
Document Type: Article
Year of publication: 2016
The title of a journal, publication series: Quantitative Finance
Volume: 16
Issue number: 11
Page range: 1679-1693
Place of publication: London [u.a.]
Publishing house: Routledge, Taylor & Francis
ISSN: 1469-7688 , 1469-7696
Publication language: English
Institution: Business School > ABWL u. Finanzwirtschaft, insbes. Bankbetriebslehre (Weber 1993-2017)
Subject: 330 Economics
Classification: JEL: G12 , G14,
Keywords (English): Limited attention , investor distraction , attention shifts , pairs trading , relative-value arbitrage
Abstract: This paper tests asset pricing implications of the investor attention shift hypothesis proposed in recent theoretical work. We create a novel proxy for the dynamics of inattention towards firm-specific information and explore its impact on prominent return anomalies. As hypothesized and with all else equal, the proxy positively predicts the post-earnings-announcement drift and negatively predicts the success of momentum strategies. Moreover, it has explanatory power for the profitability of pairs trading, a promising yet widely neglected setting concerned with the relative pricing efficiency of economically linked stocks. Taken together, our findings highlight the importance of time-varying investor attention allocation.

Dieser Eintrag ist Teil der Universitätsbibliographie.

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