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Type: Journal article
Title: How investor perceptions drive actual trading and risk-taking behavior
Author: Hoffmann, A.
Post, T.
Pennings, J.
Citation: Journal of Behavioral Finance, 2015; 16(1):94-103
Publisher: Taylor and Francis
Issue Date: 2015
ISSN: 1542-7560
Statement of
Arvid O. I. Hoffmann, Thomas Post and Joost M. E. Pennings
Abstract: Recent work in behavioral finance showed how investors' perceptions (i.e., return expectations, risk tolerance, and risk perception) affect hypothetical trading and risk-taking behavior. However, are such perceptions also capable of explaining actual trading and risk-taking behavior? To answer this question, we combine monthly survey data with matching brokerage records to construct a panel dataset allowing us to simultaneously examine investor perceptions and behavior. We find that investor perceptions and changes therein are important drivers of actual trading and risk-taking behavior: Investors with higher levels of and upward revisions of return expectations are more likely to trade, have higher turnover, trade larger amounts per transaction, and use derivatives. Investors with higher levels of and upward revisions in risk tolerance are more likely to trade, have higher buy-sell ratios, use limit orders more frequently, and hold riskier portfolios. Investors with higher levels of risk perception are more likely to trade, have higher turnover, have lower buy-sell ratios, and hold riskier portfolios.
Keywords: individual investors; investment decisions; investor perceptions; trading behavior; risk-taking behavior
Rights: © The Institute of Behavioral Finance
RMID: 0030059886
DOI: 10.1080/15427560.2015.1000332
Appears in Collections:Business School publications

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