Institutional Investor Attention

Abstract

Using a dataset of internet news reading, we measure fund-level attention to both
aggregate and firm-specific news and relate it to fund portfolio allocation decisions.
In the time-series, we find that funds shift attention toward macroeconomic news
during periods of high aggregate volatility. Those funds which exhibit stronger
attention reallocation patterns deliver higher returns. In the cross-section of fund
portfolios, fund attention is positively related to stock holdings. Furthermore, fund
attention to a stock increases the value-add of that position to the fund’s performance.
This relationship is stronger using fund attention to more value-relevant
news articles.

Keywords: Investor Attention, Portfolio Allocation

JEL Classification: G10, G20, G40