Abstract
Does textual complexity affect attention and market outcomes? I conduct a global field experiment with Seeking Alpha that randomly assigns to investors different titles for the same news article. Investors are less likely to open the articles when titles are more complex---scored quantitatively and by humans. For example, a one-standard-deviation increase in length leads to 10% fewer views. Complexity is more off-putting for less-sophisticated investors, when investors are more distracted, and when news is likely less surprising. Exploiting an arbitrary tie-breaking rule, I find that complexity impacts markets---lowering announcement turnover and volatility and resulting in temporary price underreactions.
Highlights
I provide causal evidence that textual complexity a↵ects investor and market behavior, using two complementary settings
These results suggest complexity aversion is lower for more-sophisticated investors
This paper is the first causal evidence that textual complexity is a driver of investor attention and market behavior
Summary
Founded in 2004, Seeking Alpha has become the leading-crowdsourced-investment-research firm. The platform is highly active, with 4 million registered investors and 85 million page views per month. The community includes over 10,000 contributing analysts writing stock reports and 280,000 commenters. Each of the three alert emails contains one of the three proposed titles for a specific stock report written by Stone Fox Capital on Freeport-McMoRan. The three alert emails shown below were sent to 8,373, 8,274 and 8,289 investors, respectively, with random assignment of title to investor. The chief measure of attention is the number of investors who click the “Read the full article ” link to view the body of the stock report within 30 minutes of the alert email being sent. Seeking Alpha runs title testing for over 100 stock reports per day. Seeking Alpha does not run title testing on stock reports that editors chose as “must-read” or “top-idea,” because these are embargoed for paying subscribers for 24 hours.. As of December 2016, the Wall Street Journal and the Financial Times have not implemented title testing, making the Seeking Alpha data unique for studying how investors respond to the textual attributes of financial information
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