Abstract:

The mechanism of how financial market information influences investor attention is crucial to understand market movement. Prior studies have shown that market information such as firm’s earnings announcement may contribute to investors’ attention transfer between firms. Relatively less about whether stock price signals can also influence investors’ attention， and how those signals would work jointly with other market information are known. In this paper， online search data are used as a measure of investor attention and the mechanism of attention transfer in China’s A-share market is explored. It is found that both earnings announcement and stock price signals of peer firms in the same industry will attract the attention of investors to the focal firm， and that stock price signals have a stronger overall explanatory role in investors’ attention transfer compared to earnings announcements. The rise or fall of a peer firm’s stock price exhibits asymmetric influence on investors’ attention. Further research shows that for focal firms with high stock price synchronicities， their investors have lower level of attention to the earnings announcements of peer firms， but higher level of attention to short-term extreme high stock returns of peer firms. Additionally， short-term extreme high price signals of peer firms significantly increase the investor attention to those industry leaders and those firms with better accounting information quality， while the earnings announcements of peer firms have a greater impact on the attention of focal firms with lower accounting information quality. From a more macro perspective， it is also found that economic policy uncertainty weakens investors’ attention transfer.

Key words: investor attention, firms in the same industry, attention transfer, information transmission, stock price synchronicity