Attention Spillover in Asset Pricing

Exploiting a screen display feature whereby the order of stock display is determined by the stock listing codes, we lever a novel identification strategy and study the impact of attention spillover on stock prices and turnover. We find that stocks with neighbors on the display that experience higher returns in the past two weeks are associated with higher returns and turnover in the future week, after adjusting for a battery of risk and characteristic benchmarks. This finding is consistent with our conjectures that investors (a) tend to trade more after positive investment experience, and (b) are more likely to pay attention to neighboring stocks. Both conjectures are confirmed using trading data. We further sharpen the identification using a quasi-natural experiment in which the screen display for affected stocks is exogenously changed.