Sensation Seeking, Overconfidence, and Trading Activity

Mark Grinblatt, Matti Keloharju

NBER Working Paper No. 12223
Issued in May 2006
NBER Program(s):Asset Pricing Program

This study analyzes the role that two psychological attributes—sensation seeking and overconfidence—play in the tendency of investors to trade stocks. Equity trading data are combined with data from an investor’s tax filings, driving record, and psychological profile. We use the data to construct measures of overconfidence and sensation seeking tendencies. Controlling for a host of variables, including wealth, income, age, number of stocks owned, marital status, and occupation, we find that overconfident investors and those investors most prone to sensation seeking trade more frequently.

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Document Object Identifier (DOI): 10.3386/w12223

Published: Mark Grinblatt & Matti Keloharju, 2009. "Sensation Seeking, Overconfidence, and Trading Activity," Journal of Finance, American Finance Association, vol. 64(2), pages 549-578, 04. citation courtesy of

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