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Attention triggers and investors’ risk-taking

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  • Arnold, Marc
  • Pelster, Matthias
  • Subrahmanyam, Marti G.

Abstract

This paper investigates how individual attention triggers influence financial risk-taking based on a large sample of trading records from a brokerage service that sends standardized push messages on stocks to retail investors. By exploiting the data in a difference-in-differences (DID) setting, we find attention triggers increase investors’ risk-taking. Our DID coefficient implies attention trades carry, on average, a 19 percentage-point-higher leverage than non-attention trades. We provide a battery of cross-sectional analyses to identify the groups of investors and stocks for which this effect is stronger.

Suggested Citation

  • Arnold, Marc & Pelster, Matthias & Subrahmanyam, Marti G., 2022. "Attention triggers and investors’ risk-taking," Journal of Financial Economics, Elsevier, vol. 143(2), pages 846-875.
    • Handle: RePEc:eee:jfinec:v:143:y:2022:i:2:p:846-875
    DOI: 10.1016/j.jfineco.2021.05.031
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    More about this item

    Keywords

    Investor attention; Trading behavior; Risk-taking;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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