The Impact Of Heterogeneous Attention On Traders' Expected Profit

In the financial market,there are a lot of information.Because of the differences in cognitive ability,knowledge,experience,information source and information processing capability,people get different information.Even for the same information,different people may understand it differently.In other words,people's attention to information is heterogeneous,which is reflected in the heterogeneity of information processing ability and information.The heterogeneity affects the trading behavior,and then the expected return.However,in the existing studies,the impact of the heterogeneity on the market has not been fully considered.It is not only of great theoretical significance,but also of practical significance for investor protection and financial supervision to study the complex mechanism of heterogeneous attention.Based on the theories of attention theory,signal theory,information asymmetry theory,market equilibrium theory and optimization theory,this paper establishes a heterogeneous attention model,which fully considers the heterogeneity of individual attention and the information.The main research contents and innovations include:Firstly,the impact of heterogeneous attention on the expected return under the condition of single fundamental.The paper assumes that there are multiple informed traders with different attention in the market.By solving the market equilibrium,we find that the expected return of a given informed trader increases with his own attention,and decreases with other traders' attention.The expected total return varies nonlinearly with the attention of a given informed trader.These conclusions reveal the influence of the heterogeneity of attention on the expected return,which relaxes the assumption that informed traders get perfect information.And the paper assumes that different traders have different information structures,which expands the research on investor attention theory and trading behavior of informed traders.Secondly,the paper extends the model to multiple fundamentals,and establishes two models: different traders paying attention to different fundamentals and different types of traders paying attention to different fundamentals.The paper finds that the expected return and expected total return of the same kind of traders increase with the same kind of attention,and decrease with the increase of the heterogeneous attention,while the effect of quantity on the expected return is just the opposite.The conclusion reveals the impact of different fundamental information on the returns of all kinds of traders,by dividing traders into different types according to different fundamental information,which expands the research on the impact of heterogeneous attention on returns under the condition of single fundamental.Thirdly,after introducing liquidity demand attention traders,we find that the attention and quantity of liquidity demand attention traders reduce the expected return of fundamental followers,but have no effect on market efficiency.After the introduction of noise attention traders,the paper finds that when the number of noise attention traders is small,attention has a positive impact on the expected return of fundamental attention traders,while the number is large,the relationship between attention and expected return of fundamental followers is inverted U-shaped;the expected return of noise attention traders increases slightly at first and then decreases with the increase of attention of fundamental followers.The number of both types of traders has a positive impact on market efficiency.