Abstract
A global field experiment with Seeking Alpha shows that textual complexity affects investor attention to news and market outcomes. Investors were randomly assigned different titles for the same news article. Holding the article fixed, a one-standard-deviation increase in complexity leads to 6.1% fewer views. Complexity is more off-putting for less-sophisticated investors, when attention is more limited, and when the news is likely less important. Exploiting an arbitrary rule for breaking ties between tested titles, I find that title complexity affects markets—lowering announcement turnover and volatility.
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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