Losing Sight of the Trees for the Forest? Attention Allocation and Anomalies

This paper tests asset pricing implications of the investor attention shift hypothesis proposed in recent theoretical work. We create a novel proxy for the dynamics of inattention towards firm-specific information and explore its impact on prominent return anomalies. As hypothesized and with all else equal, the proxy positively predicts the post-earnings-announcement drift and negatively predicts the success of momentum strategies. Moreover, it has explanatory power for the profitability of pairs trading, a promising yet widely neglected setting concerned with the relative pricing efficiency of economically linked stocks. Taken together, our findings highlight the importance of time-varying investor attention allocation

The trading volume impact of local bias : evidence from a natural experiment

Exploiting several regional holidays in Germany as a source of exogenous cross-sectional variation in investor attention, we provide evidence that the well-known local bias at the individual level materially affects stock turnover at the firm level. The German setting offers favorable characteristics for this natural experiment. Stocks of firms located in holiday regions are temporarily strikingly less traded, both in statistical and economic terms, than otherwise very similar stocks in non-holiday regions. This negative turnover shock is robust and survives various tests for cross-sectional differences in information release. It is particularly pronounced in stocks less visible to non-local investors, and for smaller stocks disproportionately driven by retail investors. Our findings contribute to research on local bias, determinants of trading activity and limited attention

How should private investors diversify? : An empirical evaluation of alternative asset allocation policies to construct a "world market portfolio"

This study evaluates the out-of-sample performance of numerous asset allocation strategies from the perspective of a Euro zone investor. Besides an increased sample period from January 1973 to December 2008, our contribution to the literature is twofold. First, we compare the performance of a broad spectrum of heuristic portfolio policies with a large set of well-established model extensions of the Markowitz (1952) mean-variance framework. Second, we explicitly differentiate between two prominent ways of diversification that are usually analyzed separately: international diversification in the stock market and diversification over different asset classes. Our analysis allows us to compare and discuss different diversification strategies to construct a "world market portfolio" that is as ex-ante efficient as possible. For international equity diversification, we find that none of the Markowitz-based portfolio models is able to significantly outperform simple heuristics. Among those, the GDP weighting dominates the traditional cap-weighted approach. In the asset allocation case, Markowitz models are again not able to beat a broad spectrum of fixed-weight alternatives out-of-sample. Analyzing more than 5000 heuristics, we find that in fact almost any form of well-balanced allocation over asset classes offers similar diversification gains as even very sophisticated and recently developed portfolio optimization approaches. Based on our findings, we suggest a simple and cost-efficient allocation approach for private investors

Wie diversifiziere ich richtig? : Eine Diskussion alternativer Asset Allocation Ansätze zur Konstruktion eines "Weltportfolios"

Die vorliegende Studie evaluiert die Effizienz verschiedener Ansätze zur Vermögensallokation aus Sicht eines deutschen Privatanlegers. Neben einem erweiterten Zeitraum von 1973 bis 2007 tragen wir dabei in zweifacher Hinsicht zur Literatur bei. Erstens vergleichen wir heuristische Strategien mit wissenschaftlichen Optimierungsmodellen im Sinne von Markowitz (1952). Zweitens unterscheiden wir in der Untersuchung zwischen zwei prominenten, aber häufig getrennt voneinander analysierten Diversifikationsformen: einer geographischen Streuung des Anlagevermögens im Aktienbereich und einer Verteilung des Anlagevermögens auf verschiedene Anlageklassen. Hierzu berücksichtigen wir neben Aktien zusätzlich Renten und Rohstoffe. Die Zusammenführung dieser beiden Aspekte resultiert in der Diskussion denkbarer Aufteilungsmechanismen zur Konstruktion eines möglichst effizienten "Weltportfolios". In der empirischen Analyse erweist sich im Fall einer Diversfikation im Aktienbereich kein theoretisch fundiertes Optimierungsmodell gegenüber heuristischen Ansätzen als überlegen. In dieser Kategorie weist eine fundamentale, BIP-basierte Gewichtung signifikant bessere Ergebnisse als eine Marktkapitalisierungsgewichtung auf. Eine simple Gleichgewichtung erzielt zudem, in Übereinstimmung mit DeMiguel et al. (2008), mit Optimierungsverfahren vergleichbare Resultate. Auch unter Einbeziehung von Renten und Rohstoffen bieten Markowitz-Modelle out-of-sample keine besseren Ergebnisse als heuristische, auf zeitstabilen Gewichten beruhende Ansätze, die wir aus bestehenden Empfehlungen in der Literatur ableiten und auf ihre Robustheit hin Überprüfen. Auf Grundlage unserer Resultate schlagen wir daher einen einfach und kostengünstig zu implementierenden Ansatz zur Vermögensallokation für Privatanleger vor

How should individual investors diversify? An empirical evaluation of alternative asset allocation policies

This paper evaluates numerous diversification strategies as a possible remedy against widespread costly investment mistakes of individual investors. Our results reveal that a very broad range of simple heuristic allocation schemes offers similar diversification gains, as well-established or recently developed portfolio optimization approaches. This holds true for both international diversification in the stock market and diversification over different asset classes. We thus suggest easy-to-implement allocation guidelines for individual investors

Empirical essays on the stock market impact of limited investor attention

The major goal of this thesis is to broaden and deepen the understanding on how limited investor attention affects economic aggregates in financial markets. In doing so, this thesis aims to contribute to a fundamental debate in behavioral economics: Do phenomena in individual behavior matter in that they extend to the market level? More specifically, this thesis consists of four distinct research projects. Each of the first three derives implications of limited investor attention for equilibrium outcomes at the stock-level, and then subsequently investigates their empirical validity in depth. In this way, the thesis uncovers and explains several novel patterns in turnover and return data. A fourth empirical study explores the relative performance of simple portfolio diversification strategies, whose design might be considered as meeting the needs of cognitively overloaded private investors

Integrated multilayer stretchable printed circuitboards paving the way for deformable active matrix

Conventional rigid electronic systems use a number of metallization layers to route all necessary connections to and from isolated surface mount devices using well-established printed circuit board technology. In contrast, present solutions to prepare stretchable electronic systems are typically confined to a single stretchable metallization layer. Crossovers and vertical interconnect accesses remain challenging; consequently, no reliable stretchable printed circuit board (SPCB) method has established. This article reports an industry compatible SPCB manufacturing method that enables multilayer crossovers and vertical interconnect accesses to interconnect isolated devices within an elastomeric matrix. As a demonstration, a stretchable (260%) active matrix with integrated electronic and optoelectronic surface mount devices is shown that can deform reversibly into various 3D shapes including hemispherical, conical or pyramid

Surface tension directed fluidic self-assembly of semiconductor chips across length scales and material boundaries

This publication provides an overview and discusses some challenges of surface tension directed fluidic self-assembly of semiconductor chips which are transported in a liquid medium. The discussion is limited to surface tension directed self-assembly where the capture, alignment, and electrical connection process is driven by the surface free energy of molten solder bumps where the authors have made a contribution. The general context is to develop a massively parallel and scalable assembly process to overcome some of the limitations of current robotic pick and place and serial wire bonding concepts. The following parts will be discussed: (2) Single-step assembly of LED arrays containing a repetition of a single component type; (3) Multi-step assembly of more than one component type adding a sequence and geometrical shape confinement to the basic concept to build more complex structures; demonstrators contain (3.1) self-packaging surface mount devices, and (3.2) multi-chip assemblies with unique angular orientation. Subsequently, measures are discussed (4) to enable the assembly of microscopic chips (10 μm–1 mm); a different transport method is introduced; demonstrators include the assembly of photovoltaic modules containing microscopic silicon tiles. Finally, (5) the extension to enable large area assembly is presented; a first reel-to-reel assembly machine is realized; the machine is applied to the field of solid state lighting and the emerging field of stretchable electronics which requires the assembly and electrical connection of semiconductor devices over exceedingly large area substrates