
This study shows that U.S. individual investors hold under-diversified portfolios, where the level of under-diversification is greater among younger, low-income, less-educated, and less-sophisticated investors. The level of under-diversification is also correlated with investment choices that are consistent with over-confidence, trend-following behavior, and local bias. Furthermore, investors who over-weight stocks with higher volatility and higher skewness are less diversified. In contrast, there is little evidence that portfolio size or transaction costs constrains diversification. Under-diversification is costly to most investors, but a small subset of investors under-diversify because of superior information.
Portfolio Diversification, Idiosyncratic Risk, Equity Market, Portfolio Diversification, Idiosyncratic Risk, Equity Market Correlation, Individual Investor Behavior, jel: jel:G0, jel: jel:G1, jel: jel:G12, jel: jel:G11
Portfolio Diversification, Idiosyncratic Risk, Equity Market, Portfolio Diversification, Idiosyncratic Risk, Equity Market Correlation, Individual Investor Behavior, jel: jel:G0, jel: jel:G1, jel: jel:G12, jel: jel:G11
| selected citations These citations are derived from selected sources. This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically). | 889 | |
| popularity This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network. | Top 0.1% | |
| influence This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically). | Top 0.1% | |
| impulse This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network. | Top 10% |
