Paying Attention: Investor Account Look-Ups and Information - Dependent Utility

35 Pages Posted: 18 Mar 2012  

Duane J. Seppi

Carnegie Mellon University - David A. Tepper School of Business

George Loewenstein

Carnegie Mellon University - Department of Social and Decision Sciences

Nachum Sicherman

Columbia University; IZA Institute of Labor Economics

Stephen P. Utkus

The Vanguard Group, Inc. - Center for Retirement Research

Date Written: March 15, 2012

Abstract

Using data on daily login decisions for a large sample of on-line 401(k) accounts, we investigate what drives investors to pay attention to their personal portfolios. We find that that the number of investors who check their accounts drops by 8.7% following a market decline compared to a market increase. This positive relation between attention and lagged returns is consistent with a prediction of information-dependent utility called the Ostrich Effect. We confirm that the Ostrich Effect is robust to various specifications, and show how it varies with investor characteristics. We also confirm that ostrich behavior is a relatively stable personal characteristic over time: Individuals who display ostrich behavior in 2007 are more likely to display it in 2008. The Ostrich Effect, however, seems to be swamped by information-seeking following extreme market changes such as those at the time of the 2008 stock market crash.

Keywords: attention, investor account logins, Ostrich effect

Suggested Citation

Seppi, Duane J. and Loewenstein, George and Sicherman, Nachum and Utkus, Stephen P., Paying Attention: Investor Account Look-Ups and Information - Dependent Utility (March 15, 2012). AFA 2013 San Diego Meetings Paper. Available at SSRN: https://ssrn.com/abstract=2024133 or http://dx.doi.org/10.2139/ssrn.2024133

Duane J. Seppi (Contact Author)

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
412-268-2298 (Phone)
412-268-8896 (Fax)

George F. Loewenstein

Carnegie Mellon University - Department of Social and Decision Sciences ( email )

Pittsburgh, PA 15213-3890
United States
412-268-8787 (Phone)
412-268-6938 (Fax)

Nachum Sicherman

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States
212-854-4464 (Phone)
212-316-9355 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Stephen P. Utkus

The Vanguard Group, Inc. - Center for Retirement Research ( email )

100 Vanguard Boulevard, M38
Malvern, PA 19355
United States
610-669-6308 (Phone)

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