Common Investor Coverage and Excess Return Comovement: Evidence from Seeking Alpha

nvestors typically cover a limited number of stocks and have some degree of correlation in their information sets. However, the role of this type of correlation in determining the return comovement between stock pairs is largely unexplored. In this study, we propose a new measure of common investor coverage, defined as the number of co-commentators scaled by the geometric average number of commentators for each stock pair on Seeking Alpha, to capture the underlying correlation in investors' information sets. We show that this measure is positively associated with excess comovement that cannot be explained by standard asset pricing models. Moreover, we find that the relationship between common investor coverage and excess return comovement is stronger for stocks favored by retail investors and after the introduction of the reward policy in 2011, suggesting retail investors may play an important role in driving such a relationship.