Investor Attention Allocation And Asset Price Co-movement

Given that the asset return co-movement remains one of the anomalies in the financial field,many scholars have tried to explain the existence of the return comovement from different channels.With the increasing abundance of investors’ behavioral data,the influence of investors’ psychology,perceptions and preferences on capital markets has become feasible.Interpreting the phenomenon of the return comovement between asset price from the channel of investors’ attention has gradually attracted the attention of scholars.This thesis consists of two main parts.I choose stock market and cryptocurrency market as my research sample to make cross-sectional study.In first part,I choose the extreme Bitcoin return as an attention shock event,and confirm that the extreme Bitcoin return affects investors’ attention and risk awareness,which will reduce the return comovement between world stock indices.The second part employs the extreme S&P500returns as an attention-distraction shock event to explore the impact of investor attention allocation on the return co-movement with cryptocurrency markets.I find that the occurrence of extreme S&P500 returns distracts investor attention away from cryptocurrency markets and this shock event increases the return co-movement within cryptocurrency markets.Further,all of these two empirical tests prove that the effect is asymmetric.A negative return shock has a greater impact on the return co-movement than a positive return shock does.Based on behavioral finance theory,this thesis provides new evidence on the causes of the asset pricing.This work not only helps researchers to better understand the phenomenon of asset pricing and market information efficiency,but also helps to improve the efficiency of market resource allocation.The cross-sectional study of two different markets strengthens the robustness and applicability of our findings and provides a useful complement to the causes of asset pricing.