Retail Attention, Institutional Attention

Hongqi Liu, Lin Peng, and Yi Tang

We document distinctly different clientele effects in investor attention and return responses to information. Macro news crowds out retail investor attention to firms’ earnings news by 49%. For stocks with high retail ownership, macro news dampens earnings announcement returns by 17% and substantially increases post-announcement drift, especially during high VIX periods. In contrast, macro news increases institutional investor attention to scheduled earnings announcements but not their attention to unscheduled analysts’ forecast revisions. The findings confirm the implications of rational inattention models and highlight the importance of considering clientele effects in understanding the effect of news on attention and asset prices.