TY - JOUR
T1 - Markowitz meets Kahneman
T2 - Portfolio selection under divided attention
AU - Nocetti, Diego
PY - 2006/6
Y1 - 2006/6
N2 - This paper explores how the scarcity of cognitive resources affects portfolio decisions. I consider an economy where investors allocate mental effort to learn about the mean return of a number of assets, by retrieving information from a stock of memories. As a result, parameter uncertainty arises endogenously. I characterize the optimal division of attention and the optimal portfolios and I show that limited attention might provide interesting insight into the equity home bias puzzle.
AB - This paper explores how the scarcity of cognitive resources affects portfolio decisions. I consider an economy where investors allocate mental effort to learn about the mean return of a number of assets, by retrieving information from a stock of memories. As a result, parameter uncertainty arises endogenously. I characterize the optimal division of attention and the optimal portfolios and I show that limited attention might provide interesting insight into the equity home bias puzzle.
KW - Attention allocation
KW - Equity home bias puzzle
KW - Memory deficits
KW - Portfolio choice
UR - https://www.scopus.com/pages/publications/33646699375
U2 - 10.1016/j.frl.2006.03.006
DO - 10.1016/j.frl.2006.03.006
M3 - Article
AN - SCOPUS:33646699375
SN - 1544-6123
VL - 3
SP - 106
EP - 113
JO - Finance Research Letters
JF - Finance Research Letters
IS - 2
ER -