Before revision:  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. In general, we show our predictors are powerful and outperform other predictors, such as sentiment indices and economic predictors, in terms of both in-sample and out-of-sample predictability. In-depth analysis show that the predictability of MCI mainly comes from negative news tones which is consistent with \mbox{%DIFAUXCMD Tetlock2008 .
After revision:  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 measures, other news- and information-based predictors, across recession and expansion periods. We further validate the attention spillover effect by showing that news co-mentioning leads to greater increases in Google and Bloomberg search volumes than unconditional news coverage. Our findings suggest that attention spillover in a news-based network can lead to significant stock market overvaluations, and especially when arbitrage is limited .