Investor Attention, Information Diffusion and Industry Returns
14 Pages Posted: 23 Aug 2010 Last revised: 23 Aug 2015
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Investor Attention, Information Diffusion and Industry Returns
Investor Attention, Information Diffusion and Industry Returns
Date Written: July 4, 2013
Abstract
Using the monthly data for more than 1700 Australian stocks over the period from 1990 to 2009, we investigate whether industry portfolio returns predict the aggregate market. We find that a few industries significantly lead the market even controlling for well-recognized market predictors. However, unlike U.S. studies, we do not find that the ability of an industry to predict the market is closely related to its propensity to forecast economic growth. Instead, we find that the capacity of an industry to lead the market is significantly moderated by proxies for investor attention. In general, more neglected industries are more informative in leading the markets due to delayed investor attention to the information content of these industries; and the information contained in industry portfolio returns is incorporated into the market return more slowly during economic recession when investors pay less attention to the stock markets. Our research provides new empirical evidence in support of the gradual information hypothesis from a market alternative to the U.S. ones.
Keywords: Market Efficiency, Information Diffusion, Investor Attention, Industry Returns.
JEL Classification: G12, G14, E32, E44
Suggested Citation: Suggested Citation
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