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Investor attention and portfolio performance: what information does it pay to pay attention to?

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  • Denis Davydov
  • Ian Khrashchevskyi
  • Jarkko Peltomäki

Abstract

We explore a unique dataset on individual investors’ online trading accounts to examine the determinants of their attention and its relation to portfolio performance. In particular, we investigate what individual characteristics affect investor attention and what type of information drives investment performance. We find distinct differences in investors’ attention and provide evidence that paying attention has a differential impact on performance depending on the type of information. Portfolio monitoring and attention to financial education are positively related to performance, while attention to analytical information is detrimental to performance. Attention to technical analysis is negatively related to the performance of actively trading investors but improves the performance of less frequent traders. Overall, our results provide additional evidence to the suggestion that attention to financial education is the key to investment success.

Suggested Citation

  • Denis Davydov & Ian Khrashchevskyi & Jarkko Peltomäki, 2021. "Investor attention and portfolio performance: what information does it pay to pay attention to?," The European Journal of Finance, Taylor & Francis Journals, vol. 27(17), pages 1740-1764, November.
    • Handle: RePEc:taf:eurjfi:v:27:y:2021:i:17:p:1740-1764
    DOI: 10.1080/1351847X.2021.1911823
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    Cited by:

    1. Kuo, Wei-Yu & Zhao, Jing, 2023. "Pre-holiday limit order cancellation of individual and institutional investors," Finance Research Letters, Elsevier, vol. 52(C).
    2. Denis Davydov & Jarkko Peltomäki, 2023. "Investor attention and the use of leverage," The Financial Review, Eastern Finance Association, vol. 58(2), pages 287-313, May.

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