The Effects of Individual Investors' Attention on Stock Returns: Evidence from the ChiNext Market

Abstract

We propose three hypotheses regarding the effects of individual investors' attention on stock returns according to special features of China's stock market. We adopt the Baidu index as the proxy for individual investors' attention to stocks. Empirical tests of the three hypotheses are based on sample data collected from the ChiNext market. Results show that individual investors' attention and market return have joint positive effects on short-term stock returns. Furthermore, high individual investors' attention to IPO stocks leads to high first-day returns but low long-term returns following the first trading day.

Keywords:

• Baidu Index
• ChiNext market
• individual investors' attention
• stock returns