important when investors face a search problem. Each potential purchase—even of a
stock already in the portfolio—is competing with thousands of other stocks for atten-
tion. Thus attention affects the rate at which stocks are purchased, even stocks that are
already owned. Of course, investors are, overall, more likely to sell than buy stocks they
already own. Under the attention hypothesis, however, the buy–sell imbalances of
stocks that investors already own should be greater on days in which those stocks
are attention-grabbing.
In Table 7.5, we report buy–sell imbalances for individual investors for abnormal
volume, return, and news sorts for stocks. In calculating imbalances for this table, we
consider only purchases and sales by each investor of stocks he or she already owns.
Since investors mostly sell stocks that they already own, but often buy stocks that they
do not own, a far greater proportion of these trades are sales. Therefore, nearly all of the
imbalances are negative. The relative patterns of imbalances are, however, similar to
those reported for individual investors in Tables 7.1–7.3. The ratio of purchases to sales
is higher on high-attention days. This is particularly true for the abnormal volume sort
198 News and abnormal returns
Figure 7.3.Buy–sell imbalances for investors at a large discount brokerage during earnings
announcement periods, dividend announcement periods, and other periods, for volume deciles
(top) and return deciles (bottom).