Cross-Section of Expected Returns and Attention-Driven Buying Effect in Taiwan Stock Market

Abstract

Investor’s attention plays a vital role in stock purchase behavior because investors do not have lots of time to focus on a huge number of stocks A research using data from American stock market shows that extremely positive stock returns would catch investor’s attention and cause attention-driven buying effect However market structure of American stock market is different from Taiwan stock market Trading volume of institutional investors are much more than individual investors in American stock market On the contrary trading volume of institutional investors are much less than individual investors in Taiwan stock market Thus this research examines that whether attention-driven buying effect on extremely positive returns still exists in Taiwan stock market Moreover not only extremely positive returns but also extremely negative returns would catch attention of investors and further cause attention-driven buying effect This research tests whether attention-driven buying effect on the side of extremely negative returns exists in Taiwan stock market as well Additionally this research also concentrates on further two issues First whether the extreme returns happening at different timing would have different level of attention-driven buying effect Second whether attention-driven buying effect on extremely positive returns is driven by different investor types from extremely negative returns The samples of this paper included all common stocks of whole listed companies in Taiwan from January 2009 to December 2017 The results show that finding on the side of extremely positive returns in Taiwan stock market is different from previous research in American stock market and attention-driven buying effect exactly exists on the side of extremely negative returns Furthermore the results demonstrate that the happening of extremely high daily returns and extremely low daily returns nearer to the month end more attention-driven buying effects are in the period

Date of Award	2019
Original language	English
Supervisor	Shao-Chi Chang (Supervisor)