Net Buyers of Attention-Grabbing Stocks? Who Exactly Are They?

The literature has established that retail investors are “net buyers” of attention-grabbing stocks. In this study, the authors utilize a unique dataset of actual information about 290,000 household investment accounts and track their “net buying” decisions with a focus on their economic and demographic characteristics. Unlike previous research, the authors focus not only on net buyers of attention-grabbing stocks, but also on net sellers of such stocks. They find that factors such as financial experience, wealth, consulting with advisors, and other individual characteristics, indicative of investors’ sophistication, account for the differences in the net buying decision. Specifically, the authors find that more trading experience and a lower tendency for home bias are associated with net selling during months when stocks attract a great deal of attention, and with net buying during months when they are paid less attention. The authors document that investors who trade in months of less attention are more experienced, engage more in complex trading, have less of a home bias tendency, are wealthier, and have a higher income than those who trade during the highest attention-grabbing months. Finally, the use of financial advice varies not only between households, but also between months in which stocks receive a great deal or little attention.