Alfred Qi FAN 

[Abstract] In most stock markets, average overnight returns substantially exceed average intraday returns. Using accurate and exhaustive investor-type-level flow data from Korea, we show that retail trading intensity drives this overnight–intraday return gap. We establish causality by instrumenting for retail trading proportion (RTP) with nominal share prices, which affect retail trading through accessibility constraints but carry no fundamental information. We attribute this relationship to the recurrent "retail ebb and flow": driven by sensation-seeking and illusion of control, retail investors seek daytime exposure by systematically net buying at the open and net selling at the close. Consistent with this mechanism, day trading concentrates among young, male investors using mobile and desktop platforms and intensifies following high volatility.

[Abstract] We document significant outperformance of stocks whose industry peers currently experience salient (attention-grabbing) gains, especially for those with strong social ties. The long-short strategy based on this effect can earn a risk-adjusted return of 12.5% (t = 5.58) per year. The pricing results differ from well-known cross-stock momentum and can’t be attributed to risk-based explanations. The effect is more pronounced when focal firms are more centered on social networks, or receive less attention, or are faced with greater limits of arbitrage. We argue that such peer-level underpricing is mainly due to the asymmetric effect of attention-induced price pressure from focal firm, as buying decisions of peer firms (due to salient outperformance) is more important than selling when investors has very limited attention.