• Corpus ID: 18411074

Investor attention , overconfidence and category learning

@inproceedings{Penga2006InvestorA,
  title={Investor attention , overconfidence and category learning},
  author={L.-H. Penga and Wei Xiongb},
  year={2006}
}
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… 

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