The Ostrich in Us: Selective Attention To Financial Accounts, Income, Spending, and Liquidity

Arna Olafsson, Michaela Pagel

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

This paper investigates attention to personal financial accounts using panel data from a financial management software provider containing information on daily logins, income, spending, balances, and credit limits. We first explore whether individuals pay attention in response to the arrival of income payments. Here, we utilize that weekends and holidays generate exogenous variation in regular payment arrival using a fixed-effects approach. We find that individuals are five times more likely to log in on days when they get paid. Beyond looking at the causal effect of income on attention, we examine how attention depends on spending and individual financial standing, such as cash holdings, savings, and liquidity. We find that attention is decreasing in individual spending but increasing in cash holdings and liquidity. These results are consistent with selective attention and Ostrich effects with respect to financial accounts. To rationalize our findings, we set up a model assuming individuals experience utility over news, or changes in expectations about consumption, as proposed by Koszegi and Rabin (2009). Because agents dislike bad news more than they like good news, paying attention to financial account is considered unpleasant especially when remaining cash holdings are low.
Original languageEnglish
Publication date2017
Number of pages30
Publication statusPublished - 2017
Event2017 Financial Management Association Annual Meeting - Boston, United States
Duration: 11 Oct 201714 Oct 2017
http://www.fma.org/boston

Conference

Conference2017 Financial Management Association Annual Meeting
Country/TerritoryUnited States
CityBoston
Period11/10/201714/10/2017
Internet address

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