How does investor attention with different levels of informational advantage affect market returns?

Purpose The aim of this research is to analyze the impact of investor attention, with different levels of informational advantage (local and foreign), on stock market returns. Design/methodology/approach A panel vector autoregression (PVAR) model was used to analyze ten developed markets (Germany, Canada, Spain, the United States of America, France, the Netherlands, Italy, Japan, the United Kingdom and Switzerland) and ten emerging markets (South Africa, Brazil, China, India, Indonesia, Malaysia, Mexico, Pakistan, Russia and Turkey). Attention measures, based on Google Trends search volume, covered the period from January 2017 to December 2021 for the main models and from January 2015 to December 2019 for robustness tests. Findings The results show that local attention has a significant negative impact on returns in both emerging and developed markets, suggesting an informational advantage for local investors over foreign investors. However, the impact is temporary and may also be associated with attentional pressures unrelated to fundamentals. Originality/value This study expands the understanding of the complex and transient relationship between geographically differentiated attention allocation and returns, analyzing its dynamics in emerging and developed markets.