Ehrmann, M. and Jansen, D.J. (2022). Stock Return Comovement when Investors are Distracted: More, and More Homogeneous Journal of International Money and Finance, 129:1--12.
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Affiliated author
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Publication year2022
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JournalJournal of International Money and Finance
We study how investors re-allocate attention when the opportunity cost of acquiring information suddenly increases. Using intraday data for more than 750 stocks in 19 countries, we find that investors who are distracted by FIFA World Cup soccer matches shift attention away from firm-specific and global news. When movements in global stock markets are large, pricing of global news reverts back to normal, but domestic firm-specific news keep being priced less, leading to increased comovement with the national market. This increase is stronger for stocks that normally comove less with the national market, leading to a convergence in betas across stocks.