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Institutional Investor Attention

Institutional investors are supposed to process information efficiently, read everything that matters, and adjust portfolios rationally. But in practice, attention is scarce. Funds must choose what to read, when to read it, and whether to focus on macro conditions or individual firms. This paper opens that black box. Using direct data on what institutional investors actually read online, it shows that attention is a real economic resource. Funds that reallocate attention toward macro news when volatility rises perform better.…