Characterize Investor Attention on the Social Web

We study the allocation problem of investor attention, the scarce and important economic resource in the information era, through practitioners' tweeting behaviors. We develop formalisms of" cognitive niches", interplays between heuristics from adaptive cognitive control, to account for the selectivity of investor attention. Using asset-specific tweets as direct measures of investor attention allocation, we find evidence supporting contextual utilizations of these cognitive control strategies, depending on types of asset, investors' experience as well as investing philosophy. Considering the novelty of" social" web as investors' major information environment, we quantify strengths of attention contagion resulting from relying on the" social proof" heuristic in attention allocation. The drawing power of the crowd in directing investor attention is significant and exceeds that of salient exogenous stimuli, especially when uncertainty is high. Finally, we demonstrate that as a result of adaptive cognitive control, investor attention can be different by nature. Such distinction is not captured by traditional indirect measures of investor attention, but reveals different patterns of assets' short-term volatility.