64 Pages Posted: 1 Oct 2016 Last revised: 25 Apr 2017
Date Written: April 24, 2017
We employ a novel brokerage account dataset to investigate the relation between individual investor attention and performance. Attention is positively related to investment performance, both at the portfolio return level and the individual trades level. We establish causality using an identification strategy that instruments investors’ attention using local weather conditions and provide evidence that the superior performance of high-attention investors arises because they behave as momentum traders that purchase stocks early in their momentum cycle. Finally, we show that paying attention is particularly profitable when trading stocks with high uncertainty, but for which a lot of public information is available.
Keywords: investor attention, brokerage account, momentum, investment performance
JEL Classification: D14, G02, G10, G11
Suggested Citation: Suggested Citation
Gargano, Antonio and Rossi, Alberto G., Does It Pay to Pay Attention? (April 24, 2017). Finance Down Under 2017 Building on the Best from the Cellars of Finance. Available at SSRN: https://ssrn.com/abstract=2846149 or http://dx.doi.org/10.2139/ssrn.2846149