Publications

Type of Publication: Article in Journal

The role of attention constraints for investor behavior and economic aggregates: what have we learnt so far?

Author(s):
Heiko Jacobs
Title of Journal:
Management Review Quarterly
Volume:
2015
Number of Issue:
65
pages:
217-237
Keywords:
Behavioral finance Limited attention Investor behavior Return predictability Bounded rationality
Digital Object Identifier (DOI):
doi:10.1007/s11301-015-0112-5
Link to complete version:
https://link.springer.com/article/10.1007%2Fs11301-015-0112-5
Citation:
LABEL-FOR-eidrisexport

Abstract

Abstract

Motivated by insights from psychology, a growing body of behavioral finance research highlights the importance of investors’ attention constraints. Collectively, this work suggests that time-series and cross-sectional variation in attention might not only materially affect the quality of market participants’ individual decision making, but eventually also matter for economic aggregates such as stock-level returns. While being notoriously difficult to measure, taking the role of human attention constraints into account might enable researchers to arrive at a better understanding of actual investor behavior as well as puzzling market phenomena, both of which are hard to reconcile with standard finance theory. Against this background, the goal of this paper is twofold. First, and with a focus on empirical work, it aims at providing a (necessarily selective) review, assessment, and synthesis of the research on limited investor attention. Second, it tries to identify gaps in the literature and to suggest fruitful directions for future research.