Investor PSY-chology Surrounding 'Gangnam Style'

The global success of “Gangnam Style,” the 18th K-pop single by the South Korean rapper PSY in 2012, was an exogenous shock to individual investor enthusiasm about DI Corp., because the company’s chairman and CEO is PSY’s father. The stock price of the semiconductor equipment company jumped by almost 800% in three months without material information. The count of flash mob videos and parody videos uploaded on YouTube from each country and region is our proxy for the enthusiasm of individual investors. Using Korean microstructure data that identifies non-resident foreign individual (NRFInd, hereafter) investors and resident foreign individual (RFInd, hereafter) investors by nationality, we find that NRFInd (RFInd) investors in specific countries become net buyers (sellers) of DI Corp. when a flash mob or parody music video is uploaded in their country. Domestic individual investors were also significantly affected by the foreign flash mobs, which was the driving force of the bubble. One flash mob in a foreign country was associated with 0.83% of abnormal return on the next day. Overall, the case shows that non-informative attention can sometimes drive the price away from fundamentals.