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Does It Pay to Pay Attention?

82 Pages Posted: 1 Oct 2016 Last revised: 28 Nov 2017

Antonio Gargano

University of Melbourne - Department of Finance

Alberto G. Rossi

University of Maryland - Department of Finance

Date Written: November 26, 2017

Abstract

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

Gargano, Antonio and Rossi, Alberto G., Does It Pay to Pay Attention? (November 26, 2017). Available at SSRN: https://ssrn.com/abstract=2846149 or http://dx.doi.org/10.2139/ssrn.2846149

Antonio Gargano

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

Alberto 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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