Akepanidtaworn, Klakow, Gabriela Antonie and Triwit Ariyathugun, 2020. “The Impact of News on Portfolio Selection for Inattentive Investors”, mimeo.

Triwit Ariyathugun | ASB Faculty | Research Paper

Discipline: Finance

We study how the costly portfolio adjustments affect the consumption-investment decision of household investors. Investors have the Epstein and Zin (1989) utility over consumption, which allows for understanding how the elasticity of intertemporal substitution (EIS) and the degree of relative risk aversion separately determine the decision and the inattention span. We find that the EIS which governs the short-run consumption profile is a dominant factor that controls the inattention span. Moreover, given certain EIS’s, investors may rebalance their portfolios less frequently when they are more risk averse, which is surprising given their preference for an early resolution of uncertainty.