Alfred Qi FAN
Alfred Qi FAN
currently on 2024-25 finance job market
50 Stamford Road, Singapore, 178899
50 Stamford Road, Singapore, 178899
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Job Market Paper
Job Market Paper
Attention Drift: Salience Bias, Social Networks, and Predictable Returns
solo-authored
Figure on left plots the time-series fluctuations of social peer salience bias (spST), main variable in this study
measuring the average return expectation bias of socially-connected peer firms
[Abstract] We document significant outperformance of stocks whose industry peers currently experience salient (attention-grabbing) gains, especially 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 can be differentiated from well-known cross-stock momentum and can’t be attributed to risk-based explanations or short-term reversals. The effect is more pronounced when focal firms are more centered on social networks, receive less attention, or are faced with greater limits of arbitrage. We argue that these findings align with categorical thinking, where the salience of peer firm performance distracts investor attention from the focal firm, leading to investor underreaction.
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