The determinants of international investment and attention allocation: Using internet search query data

Abstract

a b s t r a c tThis paper explores the joint determination of home bias and attention allocation. We overcome the typical challenge associated with evaluating attention allocation theories by using a new internet search query dataset to measure how much information investors decide to process. Employing an instrumental variables approach, we find empirical evidence of a two-way causality between home bias and attention. Our estimates suggest that if all countries were to receive the same level of attention as the U.S., then the average home bias by U.S. investors would fall from 85.2% to 57.3%.

The Transmission of Federal Reserve Tapering News to Emerging Financial Markets

“…The greater impact of Fed news on the robust emerging markets may be explained by anticipated balance sheet adjustments, where the size of positions and the liquidity of markets play a role (Eichengreen and Gupta, 2014). Alternatively, market attention may shift over time from the short run adjustment of positions, to the reassessment of the greater adjustment challenges facing the fragile countries to the post tapering world (Sims, 2010;and Mondria et al, 2010). Investigating the possible linkages between faster price adjustment and less volatile future growth patterns is left for future research.…”

Public Attention and Head-to-Head Campaign Fundraising: An Examination of U.S. Senate Elections

“…Recognizing this, companies and firms compete with one another to elicit the most attention. On average, the company that receives the most attention sells more products (Falkinger 2008) and the firm that captures the most attention attracts the most investors (Mondria, Wu, and Zhang 2010). If this is true of campaigns, then the candidates who stimulate more attention than their competitors will, on average, attract more donors, and ultimately, more money.…”

On the economics of superabundant information and scarce attention

“…In finance models of rational inattention have been used to study portfolio allocation decision (Peng (2005)), diversification van Nieuwerbrugh and Veldkamp (2010), understanding home bias (Mondria et al (2010)) or sectoral instead of firm specific learning (Peng and Xiong (2006)). Other papers investigate rational inattention in the context of coordination games (Hellwig and Veldkamp (2009)), or team-production problems (Dessein and Santos (2013)).…”