Is Attention Contagious? Estimating the Spillover Effect of Investor Attention in Digital Networks

This study constructs networks based on visitors' online co-searches of firms to explore the economic value of visible network linkages on digital platforms. To achieve this, we investigate whether exogenous attention shocks of some firms can diffuse through network linkages and spill over to proximate firms. We design a quasi-experiment by leveraging the attention shocks based on multiple external sources and employ an identification strategy based on difference-in-differences models with propensity score-based matching. We find strong evidence on the existence of attention spillover. Both the abnormal return and risk of neighboring firms will significantly increase after "catching" the contagion. Besides, the spillover effect persists only in a short time window and decays over time and the distance from the sources of attention shocks. Finally, we find heterogeneous spillover effects across firms: firms with small size or negative public sentiment are more susceptible to the contagion.