Investor Competence, Trading Frequency, and Home Bias / John R. Graham, Campbell R. Harvey, Hai Huang.

Format:

Book

Author/Creator:

Graham, John R.

Contributor:

National Bureau of Economic Research.

Harvey, Campbell R.

Huang, Hai.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11426.

NBER working paper series no. w11426

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2005.

Summary:

People are more willing to bet on their own judgments when they feel skillful or knowledgeable (Heath and Tversky (1991)). We investigate whether this "competence effect" influences trading frequency and home bias. We find that investors who feel competent trade more often and have a more internationally diversified portfolio. We also find that male investors, and investors with higher income or more education, are more likely to perceive themselves as competent investors than are female investors, and investors with lower income or less education. Our results are unlikely to be explained by other hypotheses, such as overconfidence or information advantage. Finally, we separately establish a link between optimism towards the home market and international portfolio diversification.

Notes:

Print version record

June 2005.