The Role Of Investor Attention In GEM Listed Company’s Stock Performance

For a long time, the researchers in behavioral finance have always had strong interest in investor attention. Which is because investors’attention will directly affect investment behavior, and thus has a strong impact on the price of the stock and even the behavior of the company. Early researches in this field generally used abnormal returns, special events, trading volume, advertisement fee, news reports and other indirect indicators as the proxies of investor attention, but these indicators fail to measure the degree of attention and its changing direction.After entering the21st century, internet technologies are further applicated to our daily life. With the help of web search engines, common investors can find out informations that they want to pay attention to in a short time. While providing such a convenience to investors, search engines have also recorded investors’searching priorities. These records provide a precise and direct way to measure the attention of common investors.Using Baidu Index as the proxy of attention, this paper generates altogether8indicators through the dimension of daily attention, the dimension of non-trading day attention and the dimension of annual attention. After the manual collection of web search volume of148GEM listed compaies in2011and2012, empirical models are settled to investigate the role of investor attention in companies’stock performance.This paper is divided into five chapters. The first chapter includes the background of study, meanings and details of study and the arrangement of paper’s structure and details. The second chapter illustrates the theory of limited attention, the proxies of investor attention, and some empirical researches about the role of investor attention in financial market performance and companies’earning announcements. The third chapter illustrates empirical hypotheses and research design. The fourth chapter includes the empirical research of the role of investor attention in companies’ stock performance. The fifth chapter summarizes the conclusions and suggestions and points out the shortage of this paper’s research and the direction of future research.This paper proves the hypothesis that investor attention plays an important role in companies’stock performance.(1) An increase in investor attention predicts higher current stock prices, but price reversal may just appear in the next trading day.(2) Trading volume and turnover rate are positively related to investor attention.(3) Stock price volatility is positively related to investor attention.(4) An increase in non-trading day attention predicts a higher price jump in the next trading day.(5) Stock price synchronicity is not significantly related to investor attention.(6) Investor attention may act as a transmission medium between company’s financial performance and its stock return. These results may help small investors to make better decisions. They may also provide a theoretical reference for regulators to establish better policies to protect small stockholder wealth.