Country-specific Attention And Security Returns

We study the effect of country-specific attention on security returns. Using Google search volume index for country names, we construct country-specific attention measures, namely U.S. (local) attention, worldwide attention and asymmetric attention. We find that U.S. local attention and asymmetric attention positively predict both price returns and premiums of U.S. listed closed-end country funds in the next month, while the links between attention and returns of U.S. single country ETFs are weak. The evidence complements Hwang (2011) on the effect of country-specific sentiment by suggesting that country-specific attention also affects local investors’ pricing of securities. In addition, it lends support to theories on market segmentation and attention allocation.