Dynamic Attention Behavior Under Return Predictability
Abstract
We investigate the dynamic problem of how much attention an investor should pay to news in order to learn about stock-return predictability and maximize expected lifetime utility. We show that the optimal amount of attention is U-shaped in the return predictor, increasing with both uncertainty and the magnitude of the predictive coefficient and decreasing with stock-return volatility. The optimal risky asset position exhibits a negative hedging...
Paper Details
Title
Dynamic Attention Behavior Under Return Predictability
Published Date
Jul 1, 2020
Journal
Volume
66
Issue
7
Pages
2906 - 2928
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