Aerospace competition, investor attention, and stock return comovement

Abstract

Fierce aerospace competition among global superpowers has resulted in strong public attention on satellite launch events in the U.S. Given limited attentional resources, U.S. investors pay more attention to market-level shocks than to firm-specific shocks, making stock returns comove more with the market on satellite launch days than on other days. We find that the effect is significantly stronger for military-related satellite launches, launches before the dissolution of the former Soviet Union, and international satellite launches by other competitors, highlighting a greater concern for national security. A trading strategy that exploits the potential satellite-induced mispricing yields an annualized abnormal risk-adjusted return of up to 17% within the three-day window around launch date. Our results are robust to a battery of robustness analyses that consider the different characteristics of satellite launches, the exclusion of aerospace firms, and stock return comovement with industries.