The Research Of Correlation Between Investor Attention And Stock Market Performance

The development of internet technology provides a more convenient and efficient channel for people to get information, the forms enrich constantly and the content increase gradually, sometimes even explosive growth. Now, instead of information,people’s attention is becoming a scarce cognitive resources, on the contrary, Therefore a contradiction is formed between the richness of information and the limitation of individual attention. American political scientist Herbert Simon mentioned in a university lecture that individual attention will become scarce gradually along with the growing amount of information, as the rich information consume an one’s attention, leading to lack of attention. In the financial market, when investor face a flood of information, the scarcity of attention decides that they have to allocate limited attention, and result of the allocation will affect the investment decision. In this context, scholars have begun to study the impact investor’s attention has on financial asset pricing and investor behavior based on the limited attention. As investor attention has a direct impact of investment behavior, in turn affect the price of asset even the behavior of listed company, over the years, behavioral finance scholars have always had a strong interest in this subdivision.According to previous literature review, turns out that scholars usually use indirect index such as abnormal return, trading volume, advertising expenses, limit price etc. to measure the degree of attention, but these indicators are depend on the transaction characteristics of financial assets itself, which can not directly measure the degree of investor attention; other scholars use media news reports, but not all investors can pay attention to the news about listed companies; with the advent of search engines, scholars began using Google Trends and Baidu Search Index, which sill has a flaw is the market noise it contained, one’s search behavior does not necessarily turn into investment decision. The investors’ attention data in this articlecome from the professional financial economic information provider——the website www.hexun.com. One of the characteristics and innovation of this study is using the hexun’s "A-share market attention" as a proxy variable for investor attention. This paper manually collected attention data from the GEM 100 companies’ daily data for eight months in 2015, then we present theoretical assumptions. On the basis of reference of the classic Fama-French three-factor model, investor attention is added to build the regression model, and we use the OLS estimation to empirical study the effects of the investor attention on the GEM stock market performance. Findings show that investor attention has certain relevance with sock’s profitability, liquidity and volatility. Specificly:(1) There is correlation between the investor attention and listed company’s stock returns, current investor attention will generate interest premiums, causing the increase of the return rate, but stock return based on the investor attention will reverse in the short term;(2) There is significant correlation between stock‘s liquidity and investor attention, current investor attention and the lag period investor attention can both cause the increase of stock trading volume and turnover rate;(3) Investor attention and share price volatility are positive correlation,the higher the attention of the stock, the greater the volatility of stock price.Based on the research methods and research conclusions of this article, investor attention has a significant effect on stock’s profitability, liquidity and volatility this study provides not only the theoretical value, but also the practical significance. On one hand, this article based on hexun launched "A-share market attention" to measure investor attention, which quantified the fuzzy variable "popularity", effectively enrich the index system of investor attention, providing a new train of thought for the resaerch on the investors’ attention. On the other hand, providing a theory basis for the government and supervision department to policy guidance or take effective regulatory measures for some industry, which can guide the medium and small investor to make rational investment decisions, also can help listed company choose the announcement timing in order to minimize the cost of financing and process effective investor relations management.