Stock habitats and information flow: How do different co-attention behaviors in online communities shape market reactions?

Investors increasingly use online investment communities to acquire financial market information before making trading decisions to reduce the cost of information acquisition and get more abundant content. Due to limited attention, investors tend to focus their trading only on a subset of assets that align with their personal investment preferences. Thus, the attention behavior of investors in the communities can reflect their focus trends and indicate future stock movements. Unlike previous research that mainly focused on investor common search and viewing behaviors, we constructed stock clusters based on different common attention behaviors data (i.e., common follow behavior by investors and common mention behavior by content contributors) and compared their predictive capabilities on stock returns. After controlling for some deterministic factors, we verified the existence of comovement among stocks within the clusters (i.e., stock habitats) and found that investors' common attention behaviors can better predict stock returns compared to content contributors. To explore the mechanism, we found a possible direction of information flow between different stock habitats and revealed the leading role of content contributors in online investment communities. This study enriches the literature on stock habitats and information diffusion in online investment communities and provides practical decision support on portfolio management for investors. Moreover, online platform managers can also use our conclusions to provide better decision-making assistance for market participants. • Different investor roles exist in online investment communities. • Limited attention makes investors follow and mention preferred stocks. • Stock clusters based on investor attention reveal co-movement among stocks. • Different attention behaviors have different predictive abilities for stock returns. • There is a definite flow of information between different investor roles.