The Impact Of Investor Attention Frequency On Stock Trading Activities

Classical financial theory based on the efficient market hypothesis holds that information should be reflected in stock price timely and accurately.It means that all available publicly information should be fully concerned and processed by rational investors,and then as a signal input in investment decision-making process,it contributes to unbiased investment behavior and ultimately determines the equilibrium asset price.Meanwhile,information activity basically supports the effective operation of the capital market.However,the research in behavioral finance combining with the cognitive psychology theory points out that,individual attention is a kind of scarce cognitive resource.Due to the limitations of information cost and individual attention ability,investors can only selectively acquire and process limit information,thus leading to the deviation in their investment decisions.Therefore,studies on investors‘ selective attention behavior and its impact on trading activities from the perspective of behavioral finance help to understand their real information acquisition decision and trading decision academically,and provide new ideas and perspectives for understanding a series of market anomalies directly caused by trading.Nowadays,the development and popularization of mobile Internet technology is raising the upsurge of surfing the Internet,and brings the scope and efficiency of information dissemination to the acme of human society.Besides,the security service mobile applications(SSM-APPs)integrate the information supply and demand of the capital market,provide low-cost,all-weather and more efficient mobile information services for individual investors,and have become one of the primary tools for mobile investors to track market dynamics,obtain firm-news and manage investment.However,these advanced information and communication technologies(ICTs)aggravate the basic contradiction between the massive information supply and the limited investors‘attention and information processing ability.Moreover,China not only has the largest scale of mobile Internet users in the world,but also a high proportion of individual investors in its A-share market.Therefore,the impact of mobile Internet technology on the information acquisition mode and trading activities of individual investors in Chinese A-share market cannot be ignored.Based on the popularization of SSM-APPs,this thesis explores the construction of investors‘ attention frequency index at the market level and its ostrich effect in investors‘ selective information acquisition behavior,and deeply investigates the impact of investors‘ attention frequency on the overall trading activities.Specifically,the main content of this thesis is as following:First,based on 163,814 users‘ daily behavior observation of 307 SSM-APPs in the Chinese mainland market from January 1,2016 to December 31,2018 in Easy View Thousand Sails(EVTS)database of Yiguan Corp.,this thesis reveals the weekly and monthly effects as well as time trend of investors‘ use of SSM-APPs,and further measures investors‘ financial attention frequency(without the above calender effect and time trend)at the market level with the startup times and online duration of SSM-APPs weighting by active user size,so as to provide the index basis and technical premise for the subsequent empirical analysis.The frequency indexes of investor attention not only describe investors‘ behavior in using smart mobile devices,but also effectively measure the average time or energy spent by investors in obtaining financial information from the frequency dimension.Second,this thesis examines the ostrich effect of investors‘ selective attention to financial information reflected in investor attention frequency,and finds that investor attention frequency will be significantly reduced after bad market information.That is,when the previous market return is negative or the previous market return volatility is high,investors will reduce the frequency of obtaining financial information through SSM-APPs,in order to deliberately avoid the negative psychological effect brought by subsequent additional bad market information.This finding verifies the information utility hypothesis and the ostrich effect,that is,bad market information brings negative effects to investors,which leads them to irrationally reduce their access to follow-up financial information,just as ostriches bury their heads in the sand when they are in danger.Third,investor attention frequency shows obviously driven effects on the overall trading activities.On the one hand,there are similar volatility characteristics in the short-term and long-term trends between the overall market trading volume and investor attention frequency;on the other hand,investor attention frequency significantly promotes the market trading activity.We also examine the effect of investor attention frequency on individual investors‘ net buying transactions,and find that investor attention frequency can significantly increase individual investors‘ net buying.It means that investors‘ selective attention contributed by the time cost limitation also leads to the deviation of their trading behaviors.That is,buying more shares after getting more financial information.Finally,this thesis further studies the asymmetric effect of investor attention frequency on the overall trading activity under different market conditions,in order to fully reveal the deviation of investment behavior caused by investors‘ information acquisition frequency.Compared with the good market conditions such as high return,bull market cycle and high sentiment periods,the marginal driving effect of investor attention frequency on trading is stronger in the periods with low market return,bear market cycle and low sentiment.However,the marginal driving effect of investor attention measured by Baidu search volume index(BSVI)on the overall trading activity is weaker in bad market periods,suggesting that there is an essential difference between investor attention indexes measured from quantity and frequency dimensions.This finding further supports the information hedonic utility hypothesis and ostrich effect,and shows that in a good market,one additional unit of attention frequency brings more pleasure for investors,and then reduces its marginal driving effect on trading decisions and behaviors.In other words,in a good market,investors‘ hedonic motivation to obtain information through SSM-APPs is more priority than trading motivation.