Abstract
This paper estimates a fund learning index based on an existing theoretical model to capture the attention allocation decisions of fund managers. This paper finds that low-learning-index funds, which allocate attention to portfolios with low information acquisition, outperform their high-learning-index counterparts by over 3% per year. Further studies show that the performance gap is driven by differences in informational advantage: Holding assets of low-learning-index funds are relatively undervalued, return spreads are larger in times of greater exploitable mispricing opportunities, and managers’ attention allocation decisions are persistent.