Selected publications from our research team

Losing Sight of the Trees for the Forest? Attention Allocation and Anomalies

Type of Publication: Article in Journal

Losing Sight of the Trees for the Forest? Attention Allocation and Anomalies

Author(s):
Heiko Jacobs, Martin Weber
Title of Journal:
Quantitative Finance
Volume:
2016
Number of Issue:
16
pages:
1679-1693
Keywords:
Behavioral finance, return predictability, limited attention, attention allocation, anomalies
Digital Object Identifier (DOI):
doi:https://doi.org/10.1080/14697688.2016.1169311
Link to complete version:
https://www.tandfonline.com/doi/abs/10.1080/14697688.2016.1169311
Citation:
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Abstract

Abstract

This paper tests asset pricing implications of the investor attention shift hypothesis proposed in theoretical work.We create a novel proxy for the dynamics of inattention towards firm-specific information and explore its impact on prominent return anomalies. As hypothesized and with all else equal, the proxy positively predicts the post-earnings-announcement drift as well as the profitability of pairs trading, and negatively predicts the success of momentum strategies. Taken together, our findings highlight the importance of time-varying investor attention allocation for the price discovery process.

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