This paper shows that the diversification choices of individual investors influence stock returns. A zero-cost portfolio that takes a long (short) position in stocks with the least (most) diversified individual investor clientele generates an annual, risk-adjusted return of 5-9%. This spread...

Campbell, Lettau, Malkiel, and Xu (2001) document a positive trend in idiosyncratic volatility during the 1962 to 1997 period. We show that this trend completely reverses itself by 2007, falling below pre-1990s levels. Furthermore, we show that the reversal is concentrated among firms with low...

Using data from a new field experiment in South Korea, we study how information from virtual communities such as stock message boards influences investors' trading decisions and investment performance. Motivated by recent studies in psychology, we conjecture that investors would use message...