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Does media attention cause abnormal return?—Evidence from China's stock market

RAO Yu-lei,PENG Die-feng,CHENG Da-chao (School of Business,Central South University,Changsha 410083,China)  
We study the relationship between the media attention and stock monthly return.The empirical results indicate that stocks received more mass-media attention will have lower return in the following month.From Aug.2000 to Jun.2008,a long-short equity strategy based on attention yields significantly 0.46%monthly excess return after controlling for Fama-French 3-factor model.This is consistent with previous study by Fang and Peress.However,the abnormal return in our paper is due to the weak performance of high attention portfolio,not the"no-coverage premium"generated by the low attention portfolio.As a result,our findings support the over attention underperformance hypothesis based on limited attention instead of the information risk hypothesis proposed by Fang and Peress.Furthermore,by controlling for size,B/M,volume,previous return and month effects,we find additional evidence supporting our hypotheses to a certain extent.
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