Abstract
We investigate investor's correlated attention as a determinant of excess stock market comovement. We propose a novel proxy, co-attention, that measures the correlation in demand for market-wide information across stock markets approximated by the Google Search Volume Index (SVI). Our results reveal significant co-attention driven to some extent by correlated news and fundamentals. Most importantly, we find a positive association between co-attention and excess correlation. This effect is more pronounced in developed economies and during recessions. We fail to document significant effects of correlated news supply on stock markets, lending support to the idea that information demand governs investing decisions. Co-attention is not only induced through international investors but domestic investors as well. Our results provide evidence of attention-induced financial contagion in unrelated economies. International investors' co-attention appears to facilitate volatility transmission indirectly across markets.
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