TY - JOUR
T1 - Portfolio concentration and the performance of individual investors
AU - Ivković, Zoran
AU - Sialm, Clemens
AU - Weisbenner, Scott
N1 - Funding Information:
∗Ivković, [email protected], Department of Finance, Broad College of Business, Michigan State University, 315 Eppley Center, East Lansing, MI 48824; Sialm, clemens.sialm@mccombs .utexas.edu, Department of Finance, McCombs School of Business, University of Texas at Austin, 1 University Station B6600, Austin, TX 78712; and Weisbenner, [email protected], Department of Finance, University of Illinois at Urbana-Champaign, 340 Wohlers Hall, 1206 South Sixth St., Champaign, IL 61820. We extend our gratitude to an anonymous discount broker for providing the data on individual investors’ trades, positions, and demographics. Special thanks go to Terry Odean for his help in obtaining and understanding the data set. We thank Dan Bergstresser, Stephen Brown (the editor), Wayne Ferson, Marcin Kacperczyk, Massimo Massa (the referee), George Pennacchi, Sophie Shive, Stijn Van Nieuwerburgh, and Lu Zheng for useful insights and helpful discussions. Ivković and Weisbenner acknowledge financial support from the College Research Board at the University of Illinois at Urbana-Champaign. We also thank seminar participants at the 2005 American Finance Association Annual Meetings, 2005 BSI Gamma Foundation Annual Conference, 2004 Chicago Quantitative Alliance Annual Conference, 2004 Financial Research Association Annual Meetings, the University of Illinois, and the University of Michigan for their comments and constructive suggestions.
PY - 2008/9
Y1 - 2008/9
N2 - This paper tests whether information advantages help explain why some individual investors concentrate their stock portfolios in a few stocks. Stock investments made by households that choose to concentrate their brokerage accounts in a few stocks outperform those made by households with more diversified accounts (especially among those with large portfolios). Excess returns of concentrated relative to diversified portfolios are stronger for stocks not included in the S&P 500 index and local stocks, potentially reflecting concentrated investors' successful exploitation of information asymmetries. Controlling for households' average investment abilities, their trades and holdings perform better when their portfolios include fewer stocks.
AB - This paper tests whether information advantages help explain why some individual investors concentrate their stock portfolios in a few stocks. Stock investments made by households that choose to concentrate their brokerage accounts in a few stocks outperform those made by households with more diversified accounts (especially among those with large portfolios). Excess returns of concentrated relative to diversified portfolios are stronger for stocks not included in the S&P 500 index and local stocks, potentially reflecting concentrated investors' successful exploitation of information asymmetries. Controlling for households' average investment abilities, their trades and holdings perform better when their portfolios include fewer stocks.
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U2 - 10.1017/S0022109000004233
DO - 10.1017/S0022109000004233
M3 - Article
AN - SCOPUS:53549127581
SN - 0022-1090
VL - 43
SP - 613
EP - 655
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 3
ER -