| Local bias refers to the phenomenon that local investors pay more attention to and allocate to the stocks of local companies than non-local investors.Numerous literatures have shown that the phenomenon of local bias is widespread in domestic and international capital markets,which directly affect the asset pricing process and have an important impact on companies’ cost of equity and corporate governance.In recent years,many scholars have found that in the context of limited investor attention and market information asymmetry,the tendency of local bias makes local and non-local investors heterogeneous in their attention to local stock information,and there may be differences in the impact of heterogeneous local and non-local attention on individual stock pricing.However,most previous literatures have researched the phenomenon of local bias only from the perspective of local investors,and very few scholars have considered both local and non-local important market participants,failing to provide a complete analysis of the transmission mechanism of local and non-local investors’ attention behavior to stock information,trading decisions and stock pricing process in the local market.Therefore,based on the perspective of investor attention heterogeneity,this paper investigates the heterogeneous characteristics of local and non-local investors’ attention to local stock information,and further explores the connections and differences between the effects of local attention and non-local attention on market information transmission and asset pricing process,which has strong theoretical and practical significance.This paper uses a sample of 275 listed companies in the GEM from January 2014 to December 2018 for the research.Based on the literature on investor attention,information asymmetry and local bias,this paper uses the Fama-French three-factor model,the Carhart four-factor model,the stock price synchrony fixed-effects model,and the stock price variance ratio fixed-effects model to conduct an empirical study.The results show that:(1)There is quantitative and information type heterogeneity between local and nonlocal attention.Local investors pay more attention to local stocks and explore value-level information,while non-local investors pay relatively less attention to local stocks and are easily induced by conspicuous noisy information in the market.(2)There is also heterogeneity in the impact of local and non-local attention on the pricing process of stocks.The behavior of local investors focusing on company value-level information will enhance the efficiency of interpreting of company fundamental information in the market and promote greater integration of company idiosyncratic information into stock prices.Thus,local attention will reduce the risk premium of individual stock,weaken the synchronization of individual stock price with market,industry and geographic portfolio stock price movements,as well as increase the efficiency of individual stock pricing.Correspondingly,the attention behavior of non-local investors to noisy information about companies will trigger attention-driven trading behavior,which will increase the risk premium of individual stock,enhance the synchronization of individual stock price with market,industry and geographic portfolio stock price movements,in addition to reducing the efficiency of individual stock pricing.The conclusions of this paper validate the heterogeneous characteristics of local and non-local attention as well as their effects on market information transmission and stock pricing mechanisms.On the theoretical side,this paper enriches the academic research related to the field of local bias from the perspective of investor attention heterogeneity.On the practical side,this paper provides a series of policy recommendations from the perspectives of individual investors,listed companies and regulators for reference. |
