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Behavioral Biases and Investor Performance


Todd Feldman


San Francisco State University - College of Business
November 10, 2011

Algorithmic Finance (2011), 1:1, 45-55

Abstract:     
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.

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Number of Pages in PDF File: 12

Keywords: Behavioral finance, agent-based models, financial markets

JEL Classification: C63, G01, G10

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Date posted: November 11, 2011  

Suggested Citation

Feldman, Todd, Behavioral Biases and Investor Performance (November 10, 2011). Algorithmic Finance (2011), 1:1, 45-55. Available at SSRN: http://ssrn.com/abstract=1957799

Contact Information

Todd Feldman (Contact Author)
San Francisco State University - College of Business ( email )
United States
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