Before revision: Investor attention has long been noticed as an important driving force of stock returns. A large number of papers have been focusing on providing direct or indirect proxies for overall investor attention . However, we believe that additional attention is a more crucial driver than overall attention in affecting stock returns . In this paper, we propose a new class of predictors, media connection indices (MCI), using news tones of media news that mentions more than one stocks to proxy effects that induced by additional attention , i.e. sentiment spillover, sentiment co-movement and connected news coverage.
After revision: We examine the effect of investor attention spillover on stock return predictability. Using a novel measure, the News Network Triggered Attention index (NNTA), we find that NNTA negatively predicts market returns with a monthly in(out)-of-sample R-square of 5.97\% (5.80\%). In the cross-section, a long-short portfolio based on news co-occurrence generates a significant monthly alpha of 68 basis points. The results are robust to the inclusion of alternative attention proxies, sentiment co-movement and connected news coverage.