Date of Degree


Document Type


Degree Name





Lin Peng

Committee Members

Donal Byard

Liuren Wu

Subject Categories

Finance and Financial Management


Asset pricing, investor attention, attention allocation, merger and acquisition, idiosyncratic risk, anomalies


This dissertation consists of three chapters that examine investor attention and its impact on corporate events and asset prices using a Google search-based measure of investor attention.

Chapter 1 This chapter investigates investor attention patterns and its determinants. I document that investor attention displays strong seasonality. It is significantly lower on Fridays and in summer months. I find that investor attention increases significantly following earnings announcements and macro news releases, and the effect is stronger for large firms. When faced with both firm-specific and market-wide information shocks, investors’ attention response to firm-specific information attenuates and their trading behavior is also affected. My evidence suggests that investors actively allocate their attention in response to information shocks and prioritize their information processing to large firms and systematic shocks, as suggested by models of rational inattention.

Chapter 2 This chapter analyzes investor attention around merger announcements and its impact on price reactions and investor trading activity. I find that (1) investor attention to target firms increase significantly during the pre-announcement period, (2) investor attention to both acquirer and target firms increases on the announcement day, but increases more for the target firms and large deals; (3) stock return responses and abnormal trading volume are less pronounced when investor attention is low. In particular, stock returns to of targets are less positive when investor attention is lower. Overall, my results suggest that investors anticipate merger announcements and that investor attention affects how investors incorporate information into asset prices.

Chapter 3 This chapter examines the impact of investor attention on the relationship between idiosyncratic volatility and stock return. I find that idiosyncratic volatility positively predicts future stock return when investor attention is high. When investor attention is low, the predictive power is insignificant. The stock returns for stocks with high idiosyncratic volatility and high investor attention do not reverse in the long-run. The evidence is consistent with the explanation that attentive investors demand a risk premium for idiosyncratic risk.