TY  - JOUR
AU  - Graham,John R.
AU  - Harvey,Campbell R.
AU  - Huang,Hai
TI  - Investor Competence, Trading Frequency, and Home Bias
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11426
PY  - 2005
Y2  - June 2005
UR  - http://www.nber.org/papers/w11426
L1  - http://www.nber.org/papers/w11426.pdf
N1  - Author contact info:
John Graham
Duke University
Fuqua School of Business
100 Fuqua Drive
Durham, NC 27708-0120
Tel: 919/660-7857
Fax: 919/660-8038
E-Mail: john.graham@duke.edu

Campbell R. Harvey
Duke University
Fuqua School of Business
Durham, NC 27708-0120
Tel: 919/660-7768
Fax: 919/660-8030
E-Mail: cam.harvey@duke.edu

Hai Huang
AB  - 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.
ER  -