FOMO in Trading: Why Traders Chase the Stocks in the News

The study

Brad Barber and Terrance Odean published All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors in the Review of Financial Studies in April 2008 (vol. 21, no. 2). Their idea was elegant:

• When you buy, you're facing thousands of possible stocks. Nobody can analyze them all, so attention filters the choice: you consider what you've noticed.
• When you sell, the problem is way smaller, because most people only sell stocks they already own.

So if attention matters, individual investors should be net buyers of attention-grabbing stocks, placing more buy orders than sell orders on the days those stocks get noticed.

The data

The authors measured a buy-sell imbalance: the difference between the number of buys and sells, as a share of all trades. A positive number means net buying.

What they found

At the large discount brokerage, with stocks sorted by how unusual each day's volume was:

• Lowest abnormal volume (bottom 10%)−18.15
• Highest abnormal volume (top 5%)+29.50
• In the news+9.35
• Not in the news+2.70

Exact values from table 3 in this article. Bar lengths share a zero baseline; no new calculation or simulated price path. Read the table and its stated sample and limits in this article.

On quiet days, individuals were net sellers. On the days with the most unusual volume, they were heavy net buyers. Stocks in the news drew more net buying than stocks that weren't, and extreme one-day price moves had the same effect.

Institutions acted differently. Value managers, for example, had an imbalance of 34.57 on the lowest-volume days and only 4.83 on the highest-volume days: they did their buying when nobody was looking. The authors concluded that institutional investors don't show attention-driven buying, most likely because they have the time, tools and mandates to search systematically.

Why it matters for returns

Buying what everyone's noticing has a cost. Attention-grabbing stocks are often the ones that just moved hard or are surrounded by news, so their prices may already reflect the hype, and you're often trading against someone better informed, or just earlier.

This ties into the same authors' research on overtrading, summed up in our article on overconfidence: the households that traded the most earned the least. Attention feeds you a constant stream of reasons to trade.

Attention in 2026

The study's data end in 1999, before smartphones, social media and commission-free apps. Since then, the attention filter has gotten stronger, not weaker:

• Push notifications announce big moves in real time.
• Social feeds rank stocks by how much people talk about them.
• "Most active" and "top movers" lists put the same few names in front of everyone.

For the biggest companies, attention never switches off. Nvidia and Tesla are among the most talked-about stocks in the world, and they also have some of the widest weekly ranges among large stocks: a median week of about 9% for Nvidia and 10% for Tesla over the last five years, as we measured in our weekly range article. Nonstop attention plus high volatility makes it easy to take positions way bigger than your plan would allow.

How attention bias shows up for futures traders

Index futures traders aren't exempt.

1. The headline trade. A dramatic news alert hits at 10:12 ET, and you take a trade because it "feels important", not because it fits a rule.
2. The single-stock distraction. You trade NQ, you watch Nvidia's earnings reaction, and you change your index plan, even though the index is barely moving.
3. The social-media level. A price level shared all over the internet becomes "important" because lots of people mention it, not because of any evidence.
4. Recency. The last big move takes over your attention, and you expect it to happen again.

Five defenses

1. Set your watchlist before the open. A short list written ahead of time limits what attention can add during the session.

2. Separate news from trades. When a headline hits, write it down and ask what, in your plan, it actually changes. If the answer is nothing, it's information, not a trade.

3. Turn off price alerts you didn't plan. Only keep the alerts tied to your levels.

4. Size by range, not by excitement. Volatile names in the news call for smaller positions for the same risk.

5. Review your unplanned trades. Tag every trade as planned or unplanned, and compare the two groups over a month, like in our overconfidence checklist.

A one-week attention audit

You can measure your own attention bias in a week, with no special tools:

After five sessions, count the share of trades that started with something other than your plan. A lot of traders are surprised by how high it is. The goal isn't zero, since news sometimes deserves a reaction. The goal is to know the number, and to see whether those trades earn their spot in your results.

What this means for reading research

A daily bias is, among other things, an attention filter. It sets out ahead of time which levels and which window matter, so the session's noise has to pass a test before it changes your plan. That's the practical value of writing a daily bias before the open.

Limits

• The data cover U.S. brokerage accounts from 1991 to 1999. Trading platforms and information flows have changed massively since.
• Buy-sell imbalance measures behavior, not profitability: this study looks at what investors bought, not at what they made.
• The institutional sample is small (43 managers) and covers different strategies.

Sources

• Barber, B. M., & Odean, T. (2008). All that glitters: The effect of attention and news on the buying behavior of individual and institutional investors. Review of Financial Studies, 21(2), 785–818. IDEAS/RePEc
• Imbalance figures: large discount brokerage, by number of trades, as reported in the paper.
• Weekly range figures: our own measurement from Alpha Vantage weekly adjusted prices, October 2021 – October 2026.

FAQ

What is attention bias in trading? The habit of trading the stocks or events that catch your attention instead of the ones your process picks.

Do retail investors buy stocks in the news? In Barber and Odean's study, individual investors were net buyers of stocks in the news and of stocks with unusually high volume or extreme moves.

Do institutional investors do the same? No. In the same study, institutional managers, especially value managers, didn't show attention-driven buying.

Is FOMO a form of attention bias? Mostly, yes. The fear of missing out kicks in when you notice a move, and attention decides which moves you notice.

How can I avoid buying hot stocks on impulse? Set your watchlist before the open, limit alerts to planned levels, size positions by range, and track unplanned trades separately.

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Research and education only. Not financial advice. Trading involves substantial risk of loss.

How this article was made: drafted with AI assistance from the research cited above; facts and figures checked by Gabriel Décarie and Karel Panneton.