Investor Attention and the Salience Effect in the Chinese Stock Market: Insights from the COVID-19 Pandemic
Lu, R. Chen, Y. Ye, Q.
Lu, R.
Chen, Y.
Ye, Q.
Publication Date
2026-01
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(c) 2026 The Authors. This is an Open Access article distributed under the Creative Commons CC-BY license (https://creativecommons.org/licenses/by/4.0/)
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2025-12-27
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Abstract
We investigate the relationship between investor attention and the salience effect (i.e. a negative relation between salience measures and subsequent returns (Cosemans and Frehen, 2021)) in the Chinese stock market using the COVID-19 pandemic as an exogenous shock to attention. We find that COVID-19 significantly distracted individual investors’ attention from stock market activities, leading to a weaker salience effect. However, institutional investors increased their attention during COVID-19 by attending more investor-firm interactive activities. Furthermore, we show that the reduction in retail attention during the COVID period is stronger for negative salient returns than for positive salient returns. As a result, the reduced salience effect during the pandemic is more pronounced for stocks with salient downsides than for stocks with salient upsides. These results indicate that investor attention causes the salience effect.
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Citation
Lu R, Chen Y, Ye Q et al (2025) Investor Attention and the Salience Effect in the Chinese Stock Market: Insights from the COVID-19 Pandemic. International Review of Economics and Finance. 105: 104875.
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Article