Limited Attention And Stock Market Performance

The traditional finance theory assumes that investors are rational and the market is effective,that is on the market all available information will be timely reflected in the prices of assets to the assumption that investors indirectly contained with unlimited attention,at the same time can handle a large number of available information.However,there are more and more financial anomalies caused people to question the traditional finance explanation such as herding,weekend effect,small firm effect financial anomalies.These anomalies makes people believe that investor attention is not infinite,but limited,especially in nowadays with the rapid development of Internet technology,information is exponential growth,investor attention is scarce.So in daily trading decisions,investors only pay attention to those who can bring the investment decision by letter The limited attention behavior of investors is an important factor that affects the pricing of financial assets.The traditional proxy measure of investor concern limited trading volume,trading board,excess returns,but these are only indirectly measure the proxy variable of investor attention,and not trading psychology well reflect investors.With the Internet search engine,search engine related investors use information collected as the universal choice,and the search engine will also record the behavior of investors under the search for relevant information,which provides accurate data for the limited attention we directly depict investor.In this paper,we use the Baidu index developed by Baidu Inc as an investor's limited attention agent,and empirical analysis of the relationship between the investor's limited attention and the sample stock market performance,which is based on the Baidu index.In the study,firstly analyzes the investors' limited attention to Baidu index and trading volume,turnover rate and other related indicators of the stock market,the results show that the Baidu index to measure investors limited attention and relevant market index showed a significant positive correlation,this conclusion provides a basis for the further study;secondly,empirical analysis influence of investors' limited attention to Baidu index to measure the stock market index related causes,results show that the investors limited attention will bring positive amplification effect on the relevant market index stock.Furthermore an empirical study on the limited attention to stock return and the impact of lagged attention on the impact of stock returns,the results show that the finite pay attentionto bring positive effect on current stock earnings,then there will be a negative effect.Finally constructed Stock price volatility index,analysis and study the relationship between investors' limited attention and stock volatility,the empirical results show that the limited attention of investors and stock price volatility is positive correlation.In China's stock market due to the small and medium-sized investors accounted for the main body,so the empirical research results has certain reference value for the individual investment decisions of investors,but also provide a theoretical reference for market supervision and management departments to formulate relevant China's protection of the interests of small investors and the legal system.