Investor attention
Subtitle: overconfidence and category learning
By: Lin Peng, Wei Xiong.
Contributors: Xiong, Wei.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11400; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11400.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Investments -- Psychological aspects.; Investments -- Decision making.
Description: "Motivated by psychological evidence that attention is a scarce cognitive resource, we model investors' attention allocation in learning and study the effects of this on asset-price dynamics.  We show that limited investor attention leads to ``category-learning" behavior, i.e., investors tend to process more market and sector-wide information than firm-specific information.  This endogenous structure of information, when combined with investor overconfidence, generates important features observed in return comovement that are otherwise difficult to explain with standard rational expectations models.  Our model also demonstrates new cross-sectional implications for return predictability"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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Mode of access: World Wide Web.