| Selective attention model shows that not all external stimuli messages will be recognized because the individual’s attention is not focused on the information that has been excluded up; and allocation theory suggests that even under the situation that all the prerequisite information can be identified, the distribution of limited cognitive resources will lead to additional treatment for humans to re-analyze the new information exceeds the upper limit of resources, and the individual’s response to external information showing a different intensity. Although there are differences between the two theories, the scope is also different, but both shows that people’s attention is limited, we can not focus on all the external information; In addition, because of the status of individual, and the sensitivity of the information, we can not show the same intensity for all the information.Due to the limit of cognitive resources, independent investors cannot get all the messages from the open market information, which means price can not fully reflect the information of the asset; in the information reflected by the asset prices may contains information on the wrong interpretation; the preference of investors to the utility of investment would affect the distribution of attention on the portfolio, and then change peoples’investment decisions, and ultimately reflected in the market price trend in the dynamics. Therefore, the limited attention of investors has a significant influence on the trading price.In this analysis of the factors affecting investor concern, attention is easily affected by the stock market performance and media-news, scholars therefore often choose these two dimensions to measure investor attention. Early mostly research use indirect measure of financial markets, but these measures often have potential noise; after the academic started analysis through a web search index, community activity, and considers these indicators direct response to investor demand information, people find it more suitable for direct indicators to be a measure of the degree of attention.Web search index has been used in the economic and financial research through modeling search index and economic and financial indicators, which is an important validation of the value of Big Data. Especially in the stock market, it has given a new supplement for the asset-pricing model, and it also helps to clarify the phenomenon including IPO underpricing, excess return. However, the current study spent too much effort studying the direct influence of investor attention on the stock market, which ignores deep-seated causes and mechanisms of the influence and the explore about cross-effecting between the rest of the control variables.In this paper, considering the influence of the individual status, we firstly divided the sample into five subsets by the company’s search index size, and find that the portfolio with more attention got better excess return at the same; secondly, considering the attention of new investors entirely attracted by the stimulate of market information, based on Fama’s model, we exam the positive correlation between stock returns, liquidity fluctuations and the investors’attention; then in the review of the first two analysis, this paper find the difference of market capitalization between model 1 and model 2, and by adding the cross-effecting variable of SVI and MK we find it more significant of the attention in the small firms; and finally, taking into account that the observations of the sample has experienced a bull market, and the time span exceeds more than half of the period of the sample, by the introduction of closed-end funds discount rate as a measure of investor sentiment index, and dividing the market sentiment into high part and low part, then we found that the investor attention influence declined when the sentiment became extreme, but when the market is in the rational stage, investors concerned more about the fancy stock selection strategies enhancing the influence of attention. |
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