Good Reasons Sell: Reason-Based Choice Among Group and Individual Investors in the Stock Market

Management Science, Vol. 49, No. 12, pp. 1636-1652, December 2003

Posted: 15 Apr 2004

See all articles by Brad M. Barber

Brad M. Barber

University of California, Davis

Chip Heath

Stanford Graduate School of Business

Terrance Odean

University of California, Berkeley - Haas School of Business

Abstract

In this paper we compare the investment decisions of groups (stock clubs) and individuals. Both individuals and clubs are more likely to purchase stocks that are associated with good reasons (e.g., a company that is featured on a list of most admired companies). However, stock clubs favor such stocks more than individuals despite the fact that such reasons do not improve performance. We describe why social dynamics may make good reasons more important for groups than individuals.

Keywords: Reason-based choice, group decision making, group polarization

JEL Classification: D81, G11

Suggested Citation

Barber, Brad M. and Heath, Chip and Odean, Terrance, Good Reasons Sell: Reason-Based Choice Among Group and Individual Investors in the Stock Market. Management Science, Vol. 49, No. 12, pp. 1636-1652, December 2003. Available at SSRN: https://ssrn.com/abstract=496164

Brad M. Barber (Contact Author)

University of California, Davis ( email )

Graduate School of Management
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Davis, CA 95616
United States
530-752-0512 (Phone)
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Chip Heath

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Terrance Odean

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
510-642-6767 (Phone)
510-666-2561 (Fax)

HOME PAGE: http://www.haas.berkeley.edu/faculty/odean.html

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