Attention and Biases: Evidence from Tax-inattentive Investors

Fisher College of Business Working Paper No. 2019-03-022

Charles A. Dice Center Working Paper No. 2019-22

64 Pages Posted: 27 Sep 2019 Last revised: 26 Jul 2021

See all articles by Justin Birru

Justin Birru

Ohio State University (OSU) - Department of Finance

Fernando Chague

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics

Rodrigo De-Losso

University of São Paulo (USP) - Department of Economics

Bruno Giovannetti

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics

Date Written: July 14, 2021

Abstract

We first provide evidence of investor inattention to a very simple and well-known capital-gains tax exemption in the Brazilian stock market. We then show that tax-inattentive investors exhibit stronger behavioral biases and worse trading performance, even after controlling for several investor-level characteristics. The evidence is consistent with inattention being a common source of behavioral biases.

Keywords: retail investors, sub-optimal decisions, behavioral biases, financial mistakes

JEL Classification: C93, D83, D91, G11, G12, G40, G41, H31

Suggested Citation

Birru, Justin and Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Attention and Biases: Evidence from Tax-inattentive Investors (July 14, 2021). Fisher College of Business Working Paper No. 2019-03-022, Charles A. Dice Center Working Paper No. 2019-22, Available at SSRN: https://ssrn.com/abstract=3459478 or http://dx.doi.org/10.2139/ssrn.3459478

Justin Birru

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

Fernando Chague

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics ( email )

Rua Itapeva 474
São Paulo, São Paulo 01332-000
Brazil

HOME PAGE: http://https://sites.google.com/site/fchague/

Rodrigo De-Losso

University of São Paulo (USP) - Department of Economics ( email )

Av. Prof. Luciano Gualberto 908
Sao Paulo SP, 05508-010
Brazil
551130930957 (Phone)

Bruno Giovannetti (Contact Author)

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics ( email )

Rua Itapeva 474 s.1202
São Paulo, São Paulo 01332-000
Brazil

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