Investor Attention: Seasonal Patterns and Endogenous Allocations

Using a Google search-based measure of investor attention, this paper investigates investor attention patterns and its determinants. We document that investor attention displays strong seasonality. It is significantly lower on Fridays and in summer months. We find that investor attention increases significantly following earnings announcements and macro news releases, and the effect is stronger for large firms. When faced with both firm-specific and market-wide information shocks, investors’ attention response to firmspecific information attenuates and their trading behavior is also affected. Our evidence suggests that investors actively allocate their attention in response to information shocks and prioritize their information processing to large firms and systematic shocks, as suggested by models of rational inattention.