We find significant delay in the response of stock returns to liquidity shock around the world. Our measure of delay is larger in countries with good informational environment and with high individualism even after controlling for institutional frictions such as market illiquidity, stock market development, and short-sale constraint. Our findings imply that investor inattention is an important source of price delay and that the attention allocation is affected by country’s informational environment and culture. Our findings suggest that high informational quality at the country-level may work as a friction by inducing the failure of optimal allocation of attention.

Keywords: attention, liquidity, underreaction, delay, predictability, transparency, overconfidence, culture, international stock market