Does It Pay to Pay Attention?
82 Pages Posted: 1 Oct 2016 Last revised: 28 Nov 2017
Date Written: November 26, 2017
We employ a novel brokerage account dataset to investigate which individual investors are the most attentive, how investors allocate their attention, and the relation between investor attention and performance. Attention is positively related to investment performance, both at the portfolio return level and the individual trades level. We provide evidence that the superior performance of high- attention investors arises because they purchase attention-grabbing stocks whose positive performance persists for up to six months. 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, attention allocation
JEL Classification: D14, G02, G10, G11
Suggested Citation: Suggested Citation