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All that Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors
Brad M. Barber University of California at Davis Terrance Odean University of California, Berkeley - Haas School of Business November 2006 EFA 2005 Moscow Meetings Paper Abstract: We test and confirm the hypothesis that individual investors are net buyers of attention-grabbing stocks, e.g., stocks in the news, stocks experiencing high abnormal trading volume, and stocks with extreme one day returns. Attention-driven buying results from the difficulty that investors have searching the thousands of stocks they can potentially buy. Individual investors don't face the same search problem when selling because they tend to sell only stocks they already own. We hypothesize that many investors only consider purchasing stocks that have first caught their attention. Thus, preferences determine choices after attention has determined the choice set.
Keywords: attention, news, investor behavior, individual investors, behavioral finance, behavioral biases JEL Classifications: G11, G12, G14, G24 Working Paper SeriesDate posted: June 20, 2005 ; Last revised: September 03, 2008Suggested CitationContact Information
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