Investor Attention Allocation and Portfolio Performance: What Information Does It Pay to Pay Attention To?
35 Pages Posted: 12 Aug 2019 Last revised: 22 Oct 2019
Date Written: October 21, 2019
We explore a unique dataset on individual investors’ online trading accounts to examine the determinants of their attention allocation and its relation to portfolio performance. In particular, we investigate what individual characteristics affect investor attentiveness and what type of information drives investment performance. We find distinct differences in investors’ attentiveness and provide evidence that paying attention has differential impact on performance depending on the type of information. Portfolio monitoring and attention to financial literacy are positively related to performance, while attention to analytical information is detrimental to performance. Attention to technical analysis is also negatively related to performance for actively trading investors, but it is positively related to trading for other investors. Overall, our results provide additional evidence to suggest that attention to financial literacy rather than analytical information is the key for investment success.
Keywords: investor attention, financial literacy, portfolio performance, information type
JEL Classification: G11, G29, G40
Suggested Citation: Suggested Citation