Investor Attention and Investor Characteristics
36 Pages Posted: 13 Dec 2012 Last revised: 26 Jun 2017
Date Written: May 1, 2017
We examine the proposition that investor attention affects the optimality of financial decisions. Using a novel dataset on the sociodemographic characteristics of visitors to mutual fund websites, we link the characteristics of investors to the characteristics of mutual funds that capture their attention. We report empirical evidence that the characteristics of individuals are systematically associated with fund characteristics that predict performance. Mutual funds with a higher fraction of female, older, and low-income visitors have a higher probability of underperforming. We also find that differences in attention allocation decisions across visitor groups can be explained by differences in their sensitivity to past performance and fund fees. Finally, there is limited evidence that fund marketing can explain why some groups of visitors pay attention to funds that can be predicted to underperform. In sum, we provide evidence that attention may explain, at least partially, the suboptimal financial decisions of some investors.
Keywords: Investor attention; Investor characteristics; Mutual fund performance; Mutual fund characteristics; Financial decisions
JEL Classification: G11, G2, G23
Suggested Citation: Suggested Citation