Attention and Retail Investors' Behavior in China

Abstract

Berkman, Koch, Tuttle, and Zhang (2012) find positive overnight returns and negative intraday returns in the U.S. market, and they attribute such pattern to Barber and Odean (2008)’s limited attention. However, I find negative overnight returns and positive intraday returns in China. While I measure investors’ attention using 15-minutes returns at the market open with intraday high-frequency transaction data, I find that high attention leads to overpricing in the rest of the trading day and reversal on the next day. The evidence from China is essentially consistent with the attention-driven intraday return pattern.