1
Q
Except of overconfidence, what else can be a rational explanation
A
Entertainment => turnover should vary across indv depending on their self-reported enjoyment of investing and gambling
2
Q
3 reasons for entertainment
A
- Recreational trading = feeling of accomplishment
- they have to overcome less of a hurdle when changing portfolio. Lower MC.
- Follow financial market actively_higher exposure to trading signals - Sensation seeking = seeking for intensity & novelty.
- Aspiration for Riches = extreme results (positively skewed) and impatient to reach for desired level wealth => results in more trading
3
Q
2 type investors
A
- Hobby
- Gambles: aspiration for riches
- younger
- male
- less wealthy
- more concentrated in equity -> more volatility, provides necessary stimuli that increases the chance of reaching desired wealth level
4
Q
Entertainment driven investors…
A
Have an increase in excess turnover
5
Q
Mc/MArginal benefit for inv that love trading
A
Mc is offset by non pecuniary benefits from researching, executing and talking about the outcome of the trade
6
Q
Self-enhancing attribution bias
A
Tendency to overestimate one”s knowledge. Tendency to overly attribute success to skill and losses to external factors
7
Q
Illusion of control
A
Wrong expectation to be able to affect chance outcomes
8
Q
Churning
A
Excess trading. (Done by broker to receive more commission = illegal)
