Faculty Publications

Active Retail Investor Attention, Stock Return Synchronicity, and Risk Factor Loadings

Document Type

Article

Keywords

Factor loading, Retail investor attention, Synchronicity

Journal/Book/Conference Title

Journal of Behavioral Finance

Abstract

This study examines how active attention from retail investors, proxied by Google search activity, affects the informational efficiency and behavioral dynamics of stock pricing. We find that increased active attention reduces stock return synchronicity and raises idiosyncratic volatility, suggesting enhanced incorporation of firm-specific information. Increased active attention also alters stocks’ loadings on key risk factors, decreasing sensitivity to fundamental factors while increasing exposure to behavior related mispricing factors. These findings highlight the dual role of retail investor attention as both a conduit for information processing and a source of behavioral distortion, especially in the zero-commission era.

Department

Department of Finance

Original Publication Date

6-26-2025

DOI of published version

10.1080/15427560.2025.2522416

Link to Full Text

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