All that Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors

Posted: 26 Jun 2008

See all articles by Brad M. Barber

Brad M. Barber

University of California, Davis

Terrance Odean

University of California, Berkeley - Haas School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: April 2008

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 do not face the same search problem when selling because they tend to sell only stocks they already own. We hypothesize that many investors consider purchasing only stocks that have first caught their attention. Thus, preferences determine choices after attention has determined the choice set.

Suggested Citation

Barber, Brad M. and Odean, Terrance, All that Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors (April 2008). Review of Financial Studies, Vol. 21, No. 2, pp. 785-818, 2008, Available at SSRN: https://ssrn.com/abstract=1151595 or http://dx.doi.org/hhm079

Brad M. Barber (Contact Author)

University of California, Davis ( email )

Graduate School of Management
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Terrance Odean

University of California, Berkeley - Haas School of Business ( email )

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HOME PAGE: http://www.haas.berkeley.edu/faculty/odean.html

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