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arXiv · 1703.02715

Joint News, Attention Spillover,and Stock Returns

Li Guo·Lin Peng·Yubo Tao·Jun Tu
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Abstract

Analyzing a comprehensive news dataset, we document that joint news coverage triggers attention contagion, causing temporarily inflated valuations for affected stocks. Tracing SEC EDGAR visits from unique IPs, we provide direct evidence of attention spillovers between stocks. Stocks with greater joint news coverage exhibit increased Google search activity, higher contemporaneous returns, and subsequent reversals. Notably, aggregated joint news coverage strongly and negatively predicts future market returns. This relationship holds out-of-sample, persists after controlling for existing predictors and fundamental linkages, and intensifies during periods of heightened uncertainty or significant market frictions. Our findings indicate that attention contagion contributes to marketwide overvaluations.

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BibTeXRIS

Li Guo, Lin Peng, Yubo Tao, Jun Tu. 2017-03-08. Joint News, Attention Spillover,and Stock Returns. https://doi.org/10.2139/ssrn.2927561

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