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Naïve *Buying* Diversification and Narrow Framing by Individual Investors / John Gathergood, David Hirshleifer, David Leake, Hiroaki Sakaguchi, Neil Stewart.
- Format:
- Book
- Author/Creator:
- Gathergood, John.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w25567.
- NBER working paper series no. w25567
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2019.
- Summary:
- We provide the first tests to distinguish whether individual investors equally balance their overall portfolios (naïve portfolio diversification--NPD) or engage in naïve buying diversification (NBD)--equally balancing values in same-day purchases of multiple assets. We find NBD in purchases of multiple stocks, and in mixed purchases of individual stocks and funds. In contrast, there is little evidence of NPD. So investors seem to narrowly frame their buy-day decision. Simulation analysis suggests that NBD substantially reduces investor welfare. These findings suggest that behavioral finance theory should incorporate transactional as well as portfolio framing.
- Notes:
- Print version record
- February 2019.
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