Individual investors who hold common stocks directly pay a tremendous performance penalty for active trading. Of 66,465 households with accounts at a large discount broker during 1991 to 1996, those that traded most earned an annual return of 11.4 percent, while the market returned 17.9 percent. The average household earned an annual return of 16.4 percent, tilted its common stock investment toward high-beta, small, value stocks, and turned over 75 percent of its portfolio annually.
It’s not what a man don’t know that makes him a fool, but what he does know
that ain’t so.
–Josh Billings, nineteenth century American humorist
Theoretical models predict that overconfident investors trade excessively. Brad Barber and Terrance Odean test this prediction by partitioning investors on gender. Psychological research demonstrates that, in areas such as finance, men are more overconfident than women. Thus, theory predicts that men will trade more excessively than women.
In this study, Professor Brad M. Barber and co-author Terrance Odean from U.C. Berkeley report their common stock investment performance analysis from 166 investment clubs from February 1991 through January 1997.
They found that the average club tilted its common stock investment toward high-beta, small-cap growth stocks and turned over 65 percent of its portfolio annually. The average club lagged the performance of a broad-based market index and the performance of individual investors. Moreover, 60 percent of the clubs underperformed the index.
UPDATE: Andrew Barkett is leaving his post as senior engineer at Facebook to bring his decade of experience in Silicon Valley to become the first-ever chief technology officer for the Republican National Committee.The June 4 announcement has stirred a whirlwind of media coverage, including the Huffington Post and Washington Post.Bark
Agilent Technologies’ Electronic Measurement Group is a $3.6 billion business that over the past decade has seen a dramatic shift in its customer base from U.S., and Western European customers to predominantly Asia-based customers. Today, the majority of the division’s revenues are generated outside of the U.S., with an increasing concentration in China.
(Davis, CA) — The UC Davis Graduate School of Management’s full-time MBA program has been ranked among the top six percent of AACSB International-accredited programs nationwide, according to U.S. News & World Report’s latest graduate business school rankings released today.