Portfolio Composition and Investors' Trading Patterns Toward 1/N

Asian journal of Economics and Finance, Forthcoming

18 Pages Posted: 6 Aug 2016 Last revised: 13 Dec 2019

See all articles by Ori Beeri

Ori Beeri

Ben Gurion University of the Negev, Guilford Glazer Faculty of Business and Management, Students

Haim Kedar-Levy

Ben Gurion University of the Negev - Guilford Glazer Faculty of Business and Management

Moty Amar

Ono Academic College

Date Written: September 30, 2019

Abstract

We explore how an understudied factor, portfolio composition, affects investors' trading preferences and whether it is associated with the Disposition Effect. Behavioral lab experiments reveal predictable trading patterns depending on salient holding amounts in the portfolio, and the latter’s association with the amount subjects were asked to sell. E.g., when instructed to sell $600 subjects tend to make simple trades, like 2X$300, or 4X$150, particularly if portfolio composition highlighted such amounts. These biased trades are inconsistent with portfolio theory, bringing the portfolio toward 1/N. Portfolio managers should be aware of such trading patterns since they may be sub-optimal by modern portfolio theory.

Keywords: Portfolio Theory; Behavioral Finance; Prospect Theory

JEL Classification: D1; G1

Suggested Citation

Beeri, Ori and Kedar-Levy, Haim and Amar, Moty, Portfolio Composition and Investors' Trading Patterns Toward 1/N (September 30, 2019). Asian journal of Economics and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2818967 or http://dx.doi.org/10.2139/ssrn.2818967

Ori Beeri

Ben Gurion University of the Negev, Guilford Glazer Faculty of Business and Management, Students ( email )

Israel

Haim Kedar-Levy (Contact Author)

Ben Gurion University of the Negev - Guilford Glazer Faculty of Business and Management ( email )

P.O. Box 653
Beer-Sheva 84105
Israel
(972) 8 6472569 (Phone)
(972) 8 6477697 (Fax)

Moty Amar

Ono Academic College ( email )

Tzahal Street 104
Kiryat Ono, 55000
Israel

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
49
Abstract Views
739
PlumX Metrics