Investor Attention on Stock Return and Liquidity : Evidence on Emerging Market
Fitri Aprilina (a), Zaӓfri Ananto Husodo (b)
(a) Master of Management, Faculty of Economics and Business, Universitas Indonesia
fitri.aprln[at]gmail.com
(b) Faculty of Economics and Business, Universitas Indonesia
Abstract
The research examines the evidence of search intensity toward stock return and liquidity in emerging market country. The sample consist of 9 emerging market country classified as MSCI EM Index. Search intensity is measured by Google Trends named Google Search Volume Index (SVI) as a direct proxy for individual investor-s attention and Abnormal Trading Volume (ATV) as proxied for liquidity. We use Fama-French Three Factor Model to explain stock return variability in emerging market. We obtain weekly data for the period from July 2014 – June 2018 and currency depreciation as attention-grabbing event. We classified the sample into 3 portfolio which are low currency depreciation, medium currency depreciation and sharp currency depreciation. The result showed that the SVI has tendency to explain stock return variability in certain portfolio even though in general SVI insignificant toward stock return and liquidity. Market factor (market risk premium) consistent positive and significant in overall portfolio. ATV has dominance information rather than SVI in explaining stock return. Additionally, we find that in low and sharp currency depreciation, investor tend to invest in small stock with high book to market meanwhile in medium currency depreciation investor tend to invest in big stock with high book to market. Overall, we conclude that in emerging market investor behave on their rationality compared with behavioral aspects.
Keywords: Fama-French Three Factor Model, Emerging Market, Investor Attention, Behavioral Finance, Asset Pricing
Topic: Management