Research On Investor Attention And Stock Price Synchronicity Under Economic Policy Uncertainty

Financial market is the market of information.Information guides price movement to optimize resource allocation.However,operation of the real market does not meet the assumptions of efficient market theory.The stock market anomalies found show that stock price is usually difficult to reflect the market information timely and effectively.On one hand,information has uncertainty and asymmetry,therefore,effective information can not be fully transmitted and reflected in the price.On the other hand,limited rationality makes it difficult for investors to deal with all the available information of the market and stock.The interaction between limited rational investors and incomplete information leads to the fact that the actual financial asset prices is not completely effective.In recent years,the rapid development of Internet technology has made up for the lack of behavioral data verification in the previous investor attention theory,and provided a rich data base for the in-depth research of behavioral finance theory.Although great progress has been made in theoretical research of investor attention,there are still many gaps in this eara.The issues about investor attention allocation,features,impacts and internal mechanism still need to be solved.Therefore,an in-depth exploration was made for the characteristics and mechanisms of investor attention under the uncertain economic policy in Chinese financial market.The specific research contents are as follows.Firstly,based on data from Internet search engine,we explore the characteristics and internal mechanism of investors’ limited attention allocation between the market and individual stocks,and investigate the impact of economic policy uncertainty on investors’ attention allocation.We find that there exists difference on the impact of economic policy uncertainty on investors’ attention allocation at market level and individual stock level.Specifically,economic policy uncertainty will cause investors to pay more attention to market information and less attention to the stock information.Moreover,the impact of economic policy uncertainty on individual stock attention is different across firms with different stock price synchronicity,leading vs non-leading position in the industry and different accounting information quality.These results mean that economic policy uncertainty has a direct impact on investors’ attention allocation,which prolongates the boundary of research on economic policy uncertainty and enriches investor attention allocation theory.Secondly,based on trading data of China stock market,we further examine the impact of investors’ attention and economic policy uncertainty on stock price synchronization,so as to explain the mechanism of investor behavior and economic policy uncertainty on market efficiency.The results show that investors’ attention and economic policy uncertainty will have an impact on stock price synchronization.Investor attention is negatively correlated with stock price synchronization,and economic policy uncertainty has a positive impact on stock price synchronization.Moreover,investor attention has mediating effect on the relationship between economic policy uncertainty and stock price synchronization.Further more,the impact of economic policy uncertainty on stock price synchronicity varies according to changes of investors’ attention synchronicity and performs different across firms with different stock price synchronicity,leading vs nonleading position in the industry and different accounting information quality.The results provide empirical evidence for financial market efficiency from the perspective of information uncertainty and limited attention of investors,which enriches the research on stock market efficiency.Finally,we employ internet search data as a measure of investor attention to examine whether and how information from peer firms,including earnings announcements and stock price signal,affect investor attention.We investigate stock price synchronicity from the perspective of investor attention transfer.We find that firm’s stock price signal has a significant and asymmetric impact on the investor attention;the earnings announcements and stock price signals from peer firms also make a significant contribution to investor attention transfer.Furthermore,the impact of peer firm information on investor attention is different across firms with different stock price synchronicity,leading vs non-leading position in the industry and different accounting information quality.Moreover,we find that economic policy uncertainty will weaken the degree of investors’ attention transfer.When the uncertainty of economic policy is high,the impact of earnings announcement and stock price movement of companies in the same industry on investors’ attention of target companies will be reduced.The results describe the characteristics of investor attention transfer of A-share market,and provide a potentially new perspective for understanding stock price synchronicity and enriches the research on behavioral finance theory.