Attention Triggers and Investors' Risk-Taking

69 Pages Posted: 20 Jul 2020 Last revised: 27 May 2021

See all articles by Marc Arnold

Marc Arnold

University of St. Gallen - School of Finance; Swiss Finance Institute

Matthias Pelster

Paderborn University

Marti G. Subrahmanyam

New York University (NYU) - Leonard N. Stern School of Business

Date Written: February 17, 2021

Abstract

This paper investigates how individual attention triggers influence financial risk-taking based on a large sample of trading records from a brokerage service that sends standardized push messages on stocks to retail investors. By exploiting the data in a difference-in-differences (DID) setting, we find that attention triggers increase investors' risk-taking. Our DID coefficient implies that attention trades carry, on average, a 19-percentage point higher leverage than non-attention trades. We provide a battery of cross-sectional analyses to identify the groups of investors and stocks for which this effect is stronger.

Keywords: Investor Attention, Trading Behavior, Risk-Taking

JEL Classification: G10, G11, G12

Suggested Citation

Arnold, Marc and Pelster, Matthias and Subrahmanyam, Marti G., Attention Triggers and Investors' Risk-Taking (February 17, 2021). Journal of Financial Economics, DOI: 10.1016/j.jfineco.2021.05.031, ADB-IGF Special Working Paper Series “Fintech to Enable Development, Investment, Financial Inclusion, and Sustainability”, Available at SSRN: https://ssrn.com/abstract=3612799 or http://dx.doi.org/10.2139/ssrn.3612799

Marc Arnold

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Matthias Pelster (Contact Author)

Paderborn University

Warburger Str. 100
Paderborn, 33098
Germany

Marti G. Subrahmanyam

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

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