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Attention and Biases: Evidence from Tax-Inattentive Investors

Author

Listed:
  • Justin Birru

    (Fisher College of Business, The Ohio State University, Columbus, Ohio 43210)

  • Fernando Chague

    (Sao Paulo School of Economics, Fundação Getulio Vargas, São Paulo 01332-000, Brazil)

  • Rodrigo De-Losso

    (Department of Economics, University of Sao Paulo, Sao Paulo 05508-220, Brazil)

  • Bruno Giovannetti

    (Sao Paulo School of Economics, Fundação Getulio Vargas, São Paulo 01332-000, Brazil)

Abstract

We first provide evidence of investor inattention to a very simple and well-known capital gains tax exemption in the Brazilian stock market. We then show that inattentive investors exhibit worse trading performance and stronger trading biases even after controlling for several investor-level variables, such as past trading experience. The evidence is consistent with inattention being one of the explanations for the prevalence of behavioral biases.

Suggested Citation

  • Justin Birru & Fernando Chague & Rodrigo De-Losso & Bruno Giovannetti, 2024. "Attention and Biases: Evidence from Tax-Inattentive Investors," Management Science, INFORMS, vol. 70(10), pages 7101-7119, October.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:10:p:7101-7119
    DOI: 10.1287/mnsc.2021.02516
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