The Wiley Finance Series : Handbook of News Analytics in Finance

While the univariate results reported in Table 7.6 (panels A and B) confirm our
predictions regarding the effect of attention-based buying on returns, they do not facil-
itate comparison with the findings of other papers. This is because stocks in the high
abnormal volume decile of panel A are likely to have experienced extreme returns, while
stocks in the lowest and highest return deciles reported in panel B are likely to have also

The effect of attention and news on the buying behavior of individual and institutional investors 205

Panel B: Percentage four-factor alphas for purchase, sales, and purchase less sales portfolios

formed after sorting on the previous day’s return—combined (2/91 to 6/99)

Abnormal volume Buys Sells Buys–sells
sort decile
Alpha t-statistic Alpha t-statistic Alpha t-statistic

1 (negative return) 0.153 0.390 0.485 1.250 0.332 1.770
2 0.440 1.980 0.544 2.540 0.104 0.910
3 0.535 3.260 0.526 3.350 0.010 0.090
4 0.658 4.020 0.409 2.800 0.250 2.290
5 0.711 3.180 0.532 2.340 0.178 1.090
6 0.516 2.410 0.249 1.240 0.267 1.970
7 0.224 1.620 0.015 0.120 0.209 2.320
8 0.158 1.020 0.079 0.560 0.079 0.820
9 0.053 0.240 0.063 0.310 0.116 1.180
10 (positive return) 1.599 4.600 1.090 3.160 0.510 3.790

Panel C: Percentage four-factor alphas for purchase, sales, and purchase less sales portfolios

formed after sorting on the current day’s abnormal trading volume and on the previous day’s

return—combined (2/91 to 6/99)

Volume sort deciles

1–2 3–8 9–10

Alpha t-statistic Alpha t-statistic Alpha t-statistic

Buys

1–2 0.049 0.11 0.716 2.43 0.092 0.22

3–8 0.256 0.76 0.541 3.18 0.477 1.69

9–10 1.129 2.34 0.001 0.00 0.833 1.89

Sells

1–2 0.873 1.94 0.548 1.86 0.613 1.45

3–8 0.293 0.95 0.349 2.43 0.499 1.76

9–10 0.970 1.93 0.121 0.49 0.225 0.53

Buys–sells

1–2 0.824 1.68 0.168 1.20 0.705 3.56

3–8 0.037 0.12 0.192 1.91 0.021 0.14

9–10 0.159 0.27 0.122 0.79 0.607 3.21

Return sort deciles