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Does It Pay to Pay Attention?

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  • Antonio Gargano
  • Alberto G Rossi

Abstract

We employ a novel brokerage account data set to investigate which individual investors are the most attentive, how investors allocate their attention, and the relation between investor attention and performance. Attention is positively related to investment performance, at both the portfolio return level and the individual trades level. We provide evidence that the superior performance of high-attention investors arises because they purchase attention-grabbing stocks whose positive performance persists for up to six months. Finally, we show that paying attention is particularly profitable when trading stocks with high uncertainty, but for which a lot of public information is available. Received April 24, 2017; editorial decision February 14, 2018 by Editor Stijn Van Nieuwerburgh. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Antonio Gargano & Alberto G Rossi, 2018. "Does It Pay to Pay Attention?," The Review of Financial Studies, Society for Financial Studies, vol. 31(12), pages 4595-4649.
    • Handle: RePEc:oup:rfinst:v:31:y:2018:i:12:p:4595-4649.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhy050
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