Behavioral Biases and Investor Performance
San Francisco State University - College of Business
November 10, 2011
Algorithmic Finance (2011), 1:1, 45-55
Research indicates that individual investors trade excessively and underperform the market indices, Barber and Odean (2000). The purpose of this paper is to help explain which behavioral biases, if any, can explain this result using a simulation approach. Results indicate that putting too much weight on the current environment, anchoring, is the largest factor in explaining individual investor underperformance. In addition, loss aversion is the largest factor to explain excessive trading. When these two biases are combined trading activity and underperformance are heightened.
Enhanced content available, see PDF for details.
Number of Pages in PDF File: 12
Keywords: Behavioral finance, agent-based models, financial markets
JEL Classification: C63, G01, G10Accepted Paper Series
Date posted: November 11, 2011
© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo1 in 0.328 seconds