Investor Attention?Asset Pricing And Investment Strategy

In reality,in face of the large number listed companies in stock market,investor attention is limited(Kahneman,1973),the attention of investors can affect the price of securities(Merton,1987),only the information which investors pay attention to can be response to stock price through transaction,so investor attention is the antecedent condition of market reaction(Quan and Wu,2010).The conclusion of existing research between investor attention and asset price are not consistent,some scholars found that there is a positive relationship between investor attention and asset price(such as:Barder and Odean,2008;Da et al.,2011),some scholars found that there is a negative relationship(such as:Zhang et al.,2011),and some scholars found no effect(such as:Zhao et al.,2013).The internal mechanism of the relationship between investor attention and asset price vary according to different perpson,there are mainly four theory and hypothesis,include "price pressure hypothesis"(Barber and Odean,2008),"neglected firm effect"(Arbel,1985),"excessive attention bring for weak performance "(Ritter,1991),"risk premium hypothesis"(Fang and Press,2009).In practical application,use investor attention to design investment strategy has become increasingly common,there are fund company both at home and abroad which use search engines(such as Google,Baidu),social media(such as Twitter,Facebook,Weibo,Stock Forum)and other real and real-time data to design investment strategy,but theoretical research is relatively slow,research achievements is also very few.Therefore,exploring the relationship between investor attention and asset price and then analysis investment strategy base on investor attention has important theoretical and practical significance.In this paper,we will analyze the relationship between investor attention and stock return through three significant events of capital market:IPO events,Financial Scandal events,Mergers and Acquisitions events.Then we will compare the investment strategies base on investor attention.The full text is divided into six chapters,the main contents of each chapter are as follows:Chapter one:Introduction.This chapter mainly introduces the research background and motivation,research significance,research content,innovation and contribution.Chapter two;Literature Review.This chapter first summarize the metrics of investor attention.Then review the research which discuss the relationship between investor attention and asset pricing.Thirdly,discuss the literature about the IPO,Financial Scandal,Mergers and Acquisitions.Fourthly,discuss the literature related to investment strategy based on attention.Finally,take a summary.Chapter three,Investor Attention,Asset Pricing and Investment Strategy--a study based on IPO event.This chapter use Baidu excess search volume and the number of post on wealth of the East to measure the degree of investor attention,empirical study the different degree of investor attention on IPO company and its IPO initial return and long-term return rate.In addition,discuss IPO break phenomenon from the perspective of investor attention,and then,compare the return of different investment strategy based on investor attention can bring.Chapter four,Investor Attention,Asset Pricing and Investment Strategy--a study based on Financial Scandal events.Use financial scandal event in listed corporation in A shares,this chapter analyzes the attention events,short change of stock price and trading strategy.This chapter first analyzes the initial direction and degree of market reaction after financial scandal were reported.Then analyzes the relationship between stock price reaction and the degree of investor attention after financial scandal;Thridly,analyzes the price mean reversion phenomenon and the relation between price mean reversion and the degree of investor attention after financial scandal were reported.Finally,analyzes the investment return with different types of investment strategies based on investor attention.Chapter five,Investor Attention,Asset Pricing and Investment Strategy--a study based on Mergers and Acquisitions events.Use Mergers and Acquisitions events in listed corporation in A shares,this chapter analyzes the attention events,short change of stock price and trading strategy.This chapter first analyzes the initial direction and degree of market reaction after Mergers and Acquisitions events were reported.Then analyzes the relationship between stock price reaction and the degree of investor attention under different market environment.Finally,this chapter compares the return of different investment strategy based on investor attention.Chapter six,Conclusion,Enlightenment and Prospect of Future Research.This chapter first summaries the conclusions and discovery of the study,and then point out the deficiencies of this research.Finally,discuss the research direction of the future.The main conclusions of this study are as follows:First of all,the relationship between investor attention and stock return and not simple positive or negative,which influenced by the incident,and also associated with time,market conditions and other factors.In IPO events,Financial Scandal events,Mergers and Acquisitions events,a high degree of investor attention affect price greater;the various investment strategies based on different investor attention can bring different return.Secondly,in IPO events,in full sample,in subsample of the mainboard,SMP and GEM,and regardless the companies list before 2013 or after 2013,higher degree of investor attention before list will bring higher initial return.After compared excess search volume with post volume,we found that excess search volume has better explanatory ability on IPO first day return.Further study found that lower degree of investor attention before IPO,higher possibility of the break on the first day.In the long run,the degree of investor attention before IPO has no effect the long-term return.In consideration of the influence of investors' anticipation,the conclusion still holds.Short selling high attention company when raising limit open first time can bring a higher investment return.Thirdly,after Financial Scandal,investor attention showed an inverse relationship with stock return,which maeans the higher degree of investor attention about the company,the lower stock return in following trading day.Initially,financial scandal causes a decline in stock prices,but in subsequent trading days there exist significant mean reversion,and the degree of mean reversion is more grater in the low degree of investor attention group after financial scandal,and mean reversion phenomenon is not obvious in high attention group.Therefore,from the perspective of investor,they should avoid buying high attention group after financial scandal in short term,and investor can choose to buy low attention group or short selling(assuming company can be short)the high attention group after financial scandal.Fourthly,there is a significant positive market reaction after the M&A announcement,and the significant positive reaction exists several trading days before the M&A announcement.After the occurrence of Mergers and Acquisitions events in the bull market,the degree of investor attention is proportional with stock return which means higher degree of investor attention will bring higher stock return,but in bear market there isn't such a relationship.Therefore,it is necessary for us to consider the macro market environment when analysis the relationship between investor attention and stock return.Short selling high attention company bring higher returns when company first open raising limit.The contribution and innovation of this article mainly in the following four aspects:(1)In the aspect of research content,we choose IPO events,Financial Scandal,Mergers and Acquisitions events in China's capital market,analysis the explanatory ability of investor attention,and then compare the return of investment strategies based on investor attention,provide new idea for investor(especially for small investors)to make decision.(2)In research perspective,we construct the research framework from information and investor attention to asset price and investment strategy;few previous studies compared measurement of investor attention and found that direct index is better to explain and predict stock return than indirect index,but there is no literature to compare different direct index,and this paper compare the different interpretation and prediction ability of investor attention in IPO events.(3)In data selection,different from previous studies,this paper based on the daily search volume rather than weekly data,which makes the research more accurate;at the same time,the sample period(up to 2015)is newer,which is helpful to understand the relationship between investor attention and stock return;(4)In conclusion,this paper found that the relationship between investor attention and stock return is different in different scenarios,which is different compare with the previous literature which found positive correlation,negative correlation or no correlation.On the one hand this paper deepen the research in this field,on the other hand it provides ways to use investor attention in our capital market to earn higher investment return for investors.