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Behavioral Finance Study Shows Investors Become More Successful Over Time
Individual investors make mistakes, especially new ones. But do they learn over time? That's the question in a new behavioral finance paper from Maximilian Koestner, Steffen Meyer, and Andreas Hackethal. Using a massive data set containing the trading history of 19,487 German investors over seven years, they examined if and how investors improve. Here's what their results told them: Investors do not learn from underdiversification A possible culprit? Stock picking. Citing Hirschleifer (2010), the authors explain that social interactions can drive underdiversifaction. Investors like to tell peers about successful ... (full story)