Individual Investors

Chapter 3 of Financial Behavior: Players, Services, Products, and Markets, edited by H. Kent Baker, Greg Filbeck, and Victor Ricciardi, Oxford University Press USA, New York, 2017

Posted: 26 May 2017 Last revised: 7 Jun 2017

See all articles by Henrik Cronqvist

Henrik Cronqvist

University of Miami - Department of Finance

Danling Jiang

College of Business, Stony Brook University

Date Written: May 23, 2017

Abstract

Traditional finance explains individual investors’ behavior and financial decision-making based on economic incentives and rationality. Modern finance, however, takes a holistic view and searches for not only economic but also biological, psychological, and social factors that shape decision-making and investor behavior. In this new approach, genetics, life experiences, psychological traits, social norms, peer influences, as well as her beliefs, values and culture in general determine stock market participation decision, share of equity holding, frequency of trading, extent of diversification, and preferences for investment styles of an individual investor. The collective preferences and actions of individual investors exert an impact on asset pricing and corporate decisions.

Keywords: Individual investors, investor behavior, modern finance, holistic view

JEL Classification: B26, D003, D10, G02

Suggested Citation

Cronqvist, Henrik and Jiang, Danling, Individual Investors (May 23, 2017). Chapter 3 of Financial Behavior: Players, Services, Products, and Markets, edited by H. Kent Baker, Greg Filbeck, and Victor Ricciardi, Oxford University Press USA, New York, 2017, Available at SSRN: https://ssrn.com/abstract=2972679

Henrik Cronqvist

University of Miami - Department of Finance ( email )

5250 University Drive
220 Jenkins Building
Coral Gables, FL 33146
United States
(305) 284-9482 (Phone)

HOME PAGE: http://sites.google.com/site/henrikcronqvist/

Danling Jiang (Contact Author)

College of Business, Stony Brook University ( email )

306 Harriman Hall
Stony Brook, NY 11794
United States

HOME PAGE: http://sites.google.com/site/danlingjiang

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