Institutional investors are supposed to process information efficiently, read everything that matters, and adjust portfolios rationally. But in practice, attention is scarce. Funds must choose what to read, when to read it, and whether to focus on macro conditions or individual firms. This paper opens that black box. Using direct data on what institutional investors actually read online, it shows ...
The study establishes a powerful connection between cognitive allocation (attention) and financial outcomes, moving the concept of information processing from a passive input to an active investment strategy. The central finding that funds shift attention to macro news during volatility reinforces limited-attention theories, suggesting that the value of information is context-dependent, becoming more salient during turbulent periods. The mechanism is not just reading more, but effectively filter...