A Behavioural Analysis of Investor Diversification

European Journal of Finance (2013)

40 Pages Posted: 11 May 2012 Last revised: 19 Dec 2013

See all articles by Ana-Maria Fuertes

Ana-Maria Fuertes

Cass Business School, City University of London

Yaz Gulnur Muradoglu

City University London - Sir John Cass Business School; Queen Mary University of London

Belma Ozturkkal

Kadir Has University Istanbul, Turkey

Date Written: May 11, 2012

Abstract

This paper studies the link between individual investors’ portfolio diversification levels and various personal traits that proxy informational advantages and overconfidence. The analysis is based on objective data from the largest Turkish brokerage house tracking 59,951 individual investors’ accounts with a total of 3,248,654 million transactions over the period 2008-2010. Wealthier, highly educated, older investors working in the finance sector and those trading relatively often show higher diversification levels possibly because they are better equipped to obtain and process information. Finance professionals, married investors, and those placing high-volume orders through investment centers show poorer diversification possibly as a reflection of overconfidence. Our analysis reveals important nonlinear effects implying that the marginal impact of overconfidence on diversification is not uniform across investors but varies according to the investor’s information gathering and processing abilities.

Keywords: Individual investor, Behavioural finance, Diversification, Portfolio risk, Emerging market

JEL Classification: G01, G11, G24

Suggested Citation

Fuertes, Ana-Maria and Muradoglu, Yaz Gulnur and Muradoglu, Yaz Gulnur and Ozturkkal, Belma, A Behavioural Analysis of Investor Diversification (May 11, 2012). European Journal of Finance (2013), Available at SSRN: https://ssrn.com/abstract=2056393 or http://dx.doi.org/10.2139/ssrn.2056393

Ana-Maria Fuertes

Cass Business School, City University of London ( email )

Faculty of Finance
106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 207 477 0186 (Phone)
+44 207 477 8881 (Fax)

HOME PAGE: http://www.city.ac.uk/people/academics/ana-maria-fuertes

Yaz Gulnur Muradoglu (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 7040 0124 (Phone)
+44 20 7040 8853 (Fax)

Queen Mary University of London ( email )

Francis Bancroft Building
Mile End Road
London, E1 4NS
United Kingdom

Belma Ozturkkal

Kadir Has University Istanbul, Turkey ( email )

Kadir Has Caddesi Cibali
Istanbul
Turkey
+90 212 533 5765 (Phone)

HOME PAGE: http://https://mgmt.khas.edu.tr/en/academic/2008

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