Source of US market predictability in international equities: the investor attention perspective

US stock returns lead other countries due to delays in information transmission caused by limited investor attention. But two conditions must be held for this argument to be tenable. One is attention’s domestic return predictability, and the other is the US’s internationally central position among attention lead-lag relationships. While many recent studies suggest investors’ limited attention materially influences future asset returns, there lacks direct evidence of investors focusing on the US first and then gradually turning their attention to the rest of the world. This paper fills this gap by demonstrating the international leadership of investor attention on the US equity market.