Does investor attention influence stock market activity? The case of spin-off deals

Abstract

This paper investigates empirically the nature of the interactions between mass media, investor attention and the stock market using data from a sample of 16 spin-off deals traded on NYSE and published between 2004 and 2010 in “Wall Street Journal”, the US’s second-largest newspaper by circulation. The results show that: i) the impact of media sentiment on the stock market reactions is enhanced / moderated by the level of attention of investors; ii) individual investors’ attention is grabbed by stocks experiencing high trading volumes on the previous day; iii) high attention could result in downward pressure on stock market returns.Media Sentiment, Investor Attention, Internet Search, Spin-off