Trading Signatures: Investor Attention Allocation in Stock Markets

Abstract

Investors in stock markets distribute their limited attention across different securities. Drawing on recent findings on social behavior, we ask whether there are persistent, characteristic patterns in how household investors distribute their attention. Our study builds on a large data set that contains every transaction of hundreds of thousands of households in a stock market for over 20 years. We find that the ways how investors distribute their attention are not only distinctive, but invariant with respect to changes in their portfolios. Moreover, investor behavior is surprisingly persistent: it takes at least seven years for an investor to significantly change her attention distribution. These observations are strikingly similar to recent findings on how people manage their social networks. However, in contrast to social relationships, time constraints do not appear to limit investors’ activeness in the markets.