Asymmetric attention and stock returns

We study the asset pricing implications of attention allocation theories. These theories allow us to predict the arrival of private information by observing investors behavior. Speci cally, attention allocation theories suggest that the arrival of private news to local investors lead to an increase in asymmetric attention to stocks between local and nonlocal investors. We construct a measure of asymmetric attention based on aggregate search volume in Google. We \u85nd that \u85rms receiving an increase in asymmetric attention earn higher returns, even after controlling for size, book-to-market, momentum and liquidity factors. We \u85nd this e¤ect to be stronger among illiquid stocks and stocks headquartered in remote locations. Our results provide direct support for attention allocation theories