Noise of Investors’ Attention Mania in the 21st Century Indian Stock Markets

Abstract

This paper characterises neoclassical investors as behavioral listeners rather than rational activists in their choices of attention searches online. It proposes that investors’ attention search is distributed at three different attention layers - focused, selective, and homogenized attention layers. It employs three sets of attention attributes on economics, politics, and political party and personality, and empirically, examines if attention search keywords at different attention layers have attention impacts on the NSE Nifty and BSE Sensex market returns. At group-wise attention attributes, the paper shows that investors’ attention impacts are scattered over attributes and related to economics, politics, and political parties and personalities. With the ARDL models, at economic attributes, it finds local vis-à-vis global attention impacts and the presence of familiarity bias on both stock markets’ returns, and the noise of “investors’ attention mania” (IAM) at the other sets of attention attributes. Furthermore, these effects vary across different attention layers.