Game in Another Town: Geography of Investor Attention and Stock Valuation

51 Pages Posted: 5 Jan 2021

See all articles by Dong Dayong

Dong Dayong

Southwest Jiaotong University

Danling Jiang

College of Business, Stony Brook University

Keke Wu

Southwest Jiaotong University

ongqHuan Zhu

Southwest Jiaotong University

Date Written: November 18, 2020

Abstract

Investors have preferences for and pay attention to local stocks, as well as stocks of companies in connected cities. Using online stock watchlist data in China, we identify the investor geographic makeup of a stock by exploiting the aggregate pattern in the geographic connections of watched stocks and examine its implications for stock valuations measured by the market to book equity. We find that cross-city attention increases stock valuations in the attended city and decreases those in the unattended. The aggregate stock demand to supply in attention-connected cities also increases local stocks’ valuation. The effects of attention-connected cities are stronger for small firms, extend to stock returns, and induce excess return comovement. The findings suggest that attention-revealed city connectivity is an important factor in asset pricing.

Keywords: Attention geography, stock watchlist, local bias, city connectivity, market valuation

JEL Classification: G11, G12, G15, G40, G41

Suggested Citation

Dayong, Dong and Jiang, Danling and Wu, Keke and Zhu, ongqHuan, Game in Another Town: Geography of Investor Attention and Stock Valuation (November 18, 2020). Available at SSRN: https://ssrn.com/abstract=3733107

Dong Dayong

Southwest Jiaotong University ( email )

No. 111, Sec. North 1, Er-Huan Rd.
Chengdu
Chengdu, Sichuan 610031
China

Danling Jiang (Contact Author)

College of Business, Stony Brook University ( email )

306 Harriman Hall
Stony Brook, NY 11794
United States

HOME PAGE: http://sites.google.com/site/danlingjiang

Keke Wu

Southwest Jiaotong University ( email )

No. 111, Sec. North 1, Er-Huan Rd.
Chengdu
Chengdu, Sichuan 610031
China

OngqHuan Zhu

Southwest Jiaotong University ( email )

No.111, North Erhuan Road
Chengdu, Sichuan 610031
China
86-28-87600822 (Phone)
86-28-87600543 (Fax)

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