Author : Massimo Massa
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Book Synopsis Behavioral Biases and Portfolio Choice by : Massimo Massa
Download or read book Behavioral Biases and Portfolio Choice written by Massimo Massa and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the way investors react to prior gains/losses and the so called quot;familiarityquot; bias. We use a new and unique dataset with detailed information on investors' various components of wealth, income, demographic characteristics and portfolio holdings identified at the stock level. We distinguish between different behavioral theories (loss aversion, house-money effect) and between behavioral and rational hypotheses (pure familiarity and information-based familiarity). We show that, on a yearly horizon, investors react to previous gains/losses according to the house-money effect. In terms of individual stock picking, we provide evidence in favor of the information-based theory and show that familiarity can be considered as a proxy for the availability of information as opposed to behavioral heuristics.