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

See all articles by Denis Davydov

Denis Davydov

University of Vaasa - Department of Accounting and Finance

Ian Khrashchevskyi

Stockholm University - Stockholm Business School, Students

Jarkko Peltomäki

Stockholm University - Stockholm Business School

Date Written: October 21, 2019

Abstract

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

Davydov, Denis and Khrashchevskyi, Ian and Peltomäki, Jarkko, Investor Attention Allocation and Portfolio Performance: What Information Does It Pay to Pay Attention To? (October 21, 2019). Available at SSRN: https://ssrn.com/abstract=3436074 or http://dx.doi.org/10.2139/ssrn.3436074

Denis Davydov

University of Vaasa - Department of Accounting and Finance ( email )

P.O. Box 700
FIN-65101 Vaasa, FI-65101
Finland
+358 6 3248 268 (Phone)

Ian Khrashchevskyi

Stockholm University - Stockholm Business School, Students ( email )

Sweden

Jarkko Peltomäki (Contact Author)

Stockholm University - Stockholm Business School ( email )

Stockholm
Sweden

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