Our study analyzes the determinants of investors' risk taking behavior. We find that investors' risk taking behavior is affected by their subjective risk attitude and by the risk and return of an investment alternative. Our results also suggest that consistent with previous findings in the...

Anecdotal evidence suggests and recent theoretical models argue that past stock returns affect subsequent stock trading volume. We study 3,000 individual investors over a 51 month period to test this apparent link between past returns and volume using several different panel regression models...

This study uses data that offers the unique opportunity to analyze how an unprecedented crisis such as the September 11 tragedy influences expected returns and volatility forecasts of individual investors. Via e-mail, we asked a randomly selected group of individual investors with accounts at a...

Overconfidence is often regarded as one of the most prevalent judgment biases. Several studies show that overconfidence can lead to suboptimal decisions of investors, managers, or politicians. Recent research, however, questions whether overconfidence should be regarded as a bias and shows that...

Theoretical models predict that overconfident investors will trade more than rational investors. We directly test this hypothesis by correlating individual overconfidence scores with several measures of trading volume of individual investors. Approximately 3,000 online broker investors were...

Behavioral finance as a subdiscipline of behavioral economics is finance incorporating findings from psychology and sociology into its theories. Behavioral finance models are usually developed to explain investor behavior or market anomalies when rational models provide no sufficient...

This paper describes a study, in which we examine the diversification behavior of financial advisors. Learning from BENARTZI and THALER (2000) about investors' naive diversification strategies, we find evidence that the advisor's asset allocation can be described by a new behavioral portfolio...

In this paper, we propose a measure of individual investor sentiment that is derived from the market for bank-issued warrants. Due to a unique warrant transaction data set from a large discount broker we are able to calculate a daily sentiment measure and test whether individual investor...

Empirical research documents that temporary trends in stock price movements exist so that riding a trend can be a profitable investment strategy. In this paper, we provide a thorough test of the trend recognition and forecasting ability of financial professionals who work in the trading room of...

Empirical research documents that temporary trends in stock price movements exist, so that riding a trend can be a profitable investment strategy. In this paper, we provide a thorough test of the trend recognition and forecasting ability of financial professionals who work in the trading room of...