Attention Utility: Evidence From Individual Investors

Abstract

Attention utility is the hedonic pleasure or pain derived purely from paying attention to information, and is distinct from the 'news utility' that arises from gaining new information. Using data on brokerage account logins by individual investors, we show that individuals devote disproportionate attention to already-known positive information about the performance of individual stocks within their portfolios. This selective attention to positive information, through its effect on logins, has consequences for trading activity; it reduces trading after recent losses and increases trading after recent gains. Attention utility has consequences not only for finance, but for any type of behavior where decisions affect attention or attention affects decisions.

Keywords: information utility, attention, investor behavior

JEL Classification: G40, G41, D14