Investor attention, analysts coverage and idiosyncratic volatility puzzle: based on behavioral perspective
International Journal of Emerging Markets
ISSN: 1746-8809
Article publication date: 17 October 2022
Issue publication date: 25 June 2024
Abstract
Purpose
Considering the role of analysts in disseminating information, the paper explains the idiosyncratic volatility puzzle of China's stock market. As the largest developing country, China's research can provide meaningful reference for the research of financial markets in other new countries.
Design/methodology/approach
From the perspective of behavior, establishing a direct link between individual investor attention and stock price overvaluation.
Findings
The authors find that there is a significant idiosyncratic volatility puzzle in China's stock market. Due to the role of mispricing, individual investor attention significantly enhances the idiosyncratic volatility effect, that is, as individual investor attention increases, the greater the idiosyncratic volatility, the lower the expected return. Attention can explain the idiosyncratic volatility puzzle in China's stock market. In addition, due to the role of information production and dissemination, securities analysts can reduce the degree of market information asymmetry and enhance the transparency of market information.
Originality/value
China is the second largest economy in the world, and few scholars analyze it from the perspective of investors' attention. The authors believe this paper has the potential in contributing to the academia.
Keywords
Acknowledgements
All of the authors of the paper have participated in certain substantive aspects of this study; Xinmin Tian and Zhiqiang Zhang contributed equally to this study. The authors thank all the reviewers for constructive suggestions, which have improved the quality of paper. The paper is only for academic research and does not represent the position of the authors' organization.
Funding: The study was funded by the National Natural Science Foundation of China [Award number: 72203136].
Citation
Tian, X., Zhang, Z., Zhang, C. and Gao, M. (2024), "Investor attention, analysts coverage and idiosyncratic volatility puzzle: based on behavioral perspective", International Journal of Emerging Markets, Vol. 19 No. 7, pp. 1804-1838. https://doi.org/10.1108/IJOEM-02-2021-0289
Publisher
:Emerald Publishing Limited
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