Title: Investor competence, trading frequency, and home bias
First published: 2005
Description: "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"--National Bureau of Economic Research web site.
Subjects: Decision making, International finance, Investments, Portfolio management, Psychological aspects, Psychological aspects of Investments
Places: Yellow Sea
LC classification: HB1