News co-occurrence attention overflow
factor.formula
The relative co-occurrence news frequency of stock i and stock j on trading day t:
The relative co-occurrence news frequency of stock i and stock j on trading day t changes month-on-month:
The net co-occurrence attention spillover factor (NCO) of stock i:
in:
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is the number of times stock i and stock j appear together in the same news within t trading days (number of co-occurring news)
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is the number of times stock i appears alone in the news within t trading days
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is the relative co-occurrence frequency of news between stock i and stock j on trading day t, indicating the degree of attention overflow from stock j to stock i. The number of times stock i appears alone is used for normalization to eliminate the influence of the amount of news coverage of stock i itself on the co-occurrence frequency.
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is the month-on-month change in the relative co-occurrence frequency of news between stock i and stock j on trading day t, indicating the month-on-month change in the degree of attention spillover from stock j to stock i.
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is the net co-occurrence attention spillover factor of stock i on trading day t, which represents the sum of the changes in the degree of attention spillover of all other stocks j to stock i. The higher the value, the stronger the attention spillover effect of investors on stock i through news reports, and the higher the potential risk of over-attention. Note that when summing j here, j is not equal to i to avoid calculating the attention spillover of stock i to itself.
factor.explanation
This factor captures the shift of investors' attention between different stocks by calculating the co-occurrence frequency and month-on-month change of stocks in the news. A positive value indicates an increase in the attention spillover from other stocks to the target stock, which may indicate an increase in the attention of the target stock, but may also be accompanied by the risk of overreaction of prices. A negative value indicates a decrease in attention spillover, and investors' attention to the target stock may decrease. Under the framework of behavioral finance, this factor can be used to study market sentiment, investor attention, and the prediction of stock returns.