NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Hai Huang

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June 2005Investor Competence, Trading Frequency, and Home Bias
with John R. Graham, Campbell R. Harvey: w11426
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.

Published: Graham, John R., Hai Huang, and Cam Harvey. "Investor Competence, Trading Frequency, and Home Bias." Management Science 55 (2009): 1094-1106. citation courtesy of

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

 
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