It’s a classic case of the squeaky wheel getting the grease. In a study co-authored by Finance Professor Shane Corwin, limits on the ability of NYSE specialists to process complex information and perform multiple tasks simultaneously had a negative impact on the less-active stocks in their portfolios during busy trading periods.
Corwin’s study suggests that specialists divert attention from those stocks during periods of unusually high trading activity, lending credence to his hypothesis that attention spent on one task reduces attention available for others. He also found specialists to be less likely to divert attention from their more active stocks.
Corwin’s research points to limited attention as a potential constraint on floor-based trading and sheds light on possible benefits of automating some transactions—reducing specialists’ workloads and allowing them to focus on trades for which they add the most value.
“The attention limits of humans must be considered in the design of trading systems,” Corwin says. “Allowing automatic execution of smaller or routine orders may reduce (those) constraints.”
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