The Behavior of Individual Investors

Brad Barber and Terrance Odean

Chapter Chapter 22 in Handbook of the Economics of Finance, 2013, vol. 2, pp 1533-1570 from Elsevier

Abstract: We provide an overview of research on the stock trading behavior of individual investors. This research documents that individual investors (1) underperform standard benchmarks (e.g. a low-cost index fund), (2) sell winning investments while holding losing investments (the “disposition effect†), (3) are heavily influenced by limited attention and past return performance in their purchase decisions, (4) engage in naïve reinforcement learning by repeating past behaviors that coincided with pleasure while avoiding past behaviors that generated pain, and (5) tend to hold undiversified stock portfolios. These behaviors deleteriously affect the financial well being of individual investors.

Keywords: Individual investors; Trading; Overconfidence; Disposition effect; Attention; diversification (search for similar items in EconPapers)
JEL-codes: D12 G11 H31 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (150)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/B9780444594068000226
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finchp:2-b-1533-1570

DOI: 10.1016/B978-0-44-459406-8.00022-6

Access Statistics for this chapter

More chapters in Handbook of the Economics of Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().