Does it Pay to Pay Attention?

54 Pages Posted: 1 Oct 2016 Last revised: 13 Nov 2016

Antonio Gargano

University of Melbourne - Department of Finance

Alberto G. Rossi

University of Maryland - Department of Finance

Date Written: October 24, 2016


We employ a novel brokerage account dataset to investigate the relation between individual investor attention and performance. In addition to portfolio holdings and trades, we observe when investors log-in to their trading account, what information they look at, and how much time they spend processing such information. We show that attention is positively related to investment performance – both at the portfolio return level as well as the individual trades level – and provide evidence that the superior performance of high-attention investors arises because they behave as momentum traders that purchase stocks early in the momentum cycle, several months before reversal sets in. We also show that paying attention is particularly profitable when trading stocks with high market capitalization, trading volume, volatility, number of analysts, dispersion of analyst forecasts, and news – indicating that it is for the stocks with high uncertainty, but for which a lot of public information is available, that it pays to pay attention. Finally, we find that account holders with higher invested wealth and higher exposure to small capitalization stocks, growth stocks, momentum stocks, and the overall market, are more attentive; that males pay more attention than females; and that attention is an increasing function of investors’ age.

Keywords: investor attention, brokerage account, momentum, investment performance

JEL Classification: D14, G02, G10, G11

Suggested Citation

Gargano, Antonio and Rossi, Alberto G., Does it Pay to Pay Attention? (October 24, 2016). Finance Down Under 2017 Building on the Best from the Cellars of Finance. Available at SSRN: or

Antonio Gargano

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010

Alberto G. Rossi (Contact Author)

University of Maryland - Department of Finance ( email )

Robert H. Smith School of Business
Van Munching Hall
College Park, MD 20742
United States

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