The DOI matches its Crossref record; 4 of the 4 references it cites were found in a registry or an index.
Hedging, Familiarity and Portfolio Choice
Abstract
We exploit the restrictions of intertemporal portfolio choice in the presence of nonfinancial income risk to test hedging using the information contained in the actual portfolio of the investor. We use a unique data set of Swedish investors with information broken down at the investor level and into various components of investor wealth, income, and demographic characteristics. Portfolio holdings are identified at the stock level. We show that investors do not hedge but invest in stocks closely related to their nonfinancial income. We explain this with familiarity, that is, the tendency to concentrate holdings in stocks to which the investor is geographically or professionally close or that he has held for a long period. We show that familiarity is not a behavioral bias, but is information driven. Familiarity-based investment allows investors to earn higher returns than they would have otherwise earned if they had hedged.
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Citations
Cites
Sample Selection Bias as a Specification Error
Heckman, J. J. (1979) · Econometrica · doi:10.2307/1912352 · Cited by 28,779
Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors
Barber, B. M., & Odean, T. (2000) · The Journal of Finance · doi:10.1111/0022-1082.00226 · Cited by 3,955
Odean, T. (1999) · American Economic Review · doi:10.1257/aer.89.5.1279 · Cited by 2,247
Risk Aversion, Wealth, and Background Risk
Guiso, L., & Paiella, M. (2008) · Journal of the European Economic Association · doi:10.1162/jeea.2008.6.6.1109 · Cited by 1,057
Cited by
The Causal Impact of Media in Financial Markets
ENGELBERG, J. E., & PARSONS, C. A. (2011) · The Journal of Finance · doi:10.1111/j.1540-6261.2010.01626.x · Cited by 1,121
Down or Out: Assessing the Welfare Costs of Household Investment Mistakes
Calvet, L. E., Campbell, J. Y., & Sodini, P. (2007) · Journal of Political Economy · doi:10.1086/524204 · Cited by 992
The Behavior of Individual Investors
Barber, B. M., & Odean, T. (2013) · Handbook of the Economics of Finance · doi:10.1016/b978-0-44-459406-8.00022-6 · Cited by 750
Household Finance: An Emerging Field
Guiso, L., & Sodini, P. (2013) · Handbook of the Economics of Finance · doi:10.1016/b978-0-44-459406-8.00021-4 · Cited by 437
The Determinants of Mutual Fund Performance: A Cross-Country Study
Ferreira, M. A., Keswani, A., Miguel, A. F., & Ramos, S. B. (2013) · Review of Finance · doi:10.1093/rof/rfs013 · Cited by 423
Metadata
- Authors
- Massa, M., & Simonov, A.
- Venue
- Review of Financial Studies
- Publisher
- Oxford University Press (OUP)
- Published
- 2006
- Volume
- 19
- Issue
- 2
- Pages
- 633-685
- ISSN
- 0893-9454 (ISSN-L)
- 1465-7368
- OpenAlex
- W2122120003
- Cited by
- 643
- References
- 4
- FWCI
- 48.82
- Type
- journal article
- Language
- en
- Open access
- closed
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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