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Do they trade as they say? Comparing survey data and trading records


This article is about three widespread and far-reaching mistakes in financial markets, namely, the Equity Home Bias, Anchoring and Herding. We use a combination of two different sources, survey answers and actual trading patterns, in order to analyze those mistakes empirically. This two-pronged approach allows us to discover interrelations between talk and action and provides a robustness check for our findings. Equity Home Bias is more predominant in real trading than investors admit in the questionnaire. In addition to domestic stocks, German investors also overweight Non-German Eurozone stocks. Consequently, investors hold an astonishing 82.13 per cent of their portfolio in stocks denominated in Euro. Anchoring in the survey is positively correlated with the Disposition Effect in actual trading. We ask investors if they allow themselves to be influenced by others, and we demonstrate that there is a positive link between affirmative answers and Herding in real action. In addition, we study whether behavioral differences exist between various socio-demographic groups. Higher educated investors are less inclined to exhibit the Equity Home Bias, Anchoring and Herding. Whereas gender hardly influences biases, interestingly, age is positively related to Equity Home Bias but negatively related to the other two biases.

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Correspondence to Tristan Nguyen.



Survey (translated from German)

(1) Are you?

□ female   □ male

(2) How old are you?

_________________ years old

(3) What is your level of education?

□ no college degree

□ college degree or higher

(4) Imagine you could choose between German stocks and foreign stocks. What would be the fraction of German stocks in your portfolio?

____________________ per cent

(5) Please estimate the distance from Boston (United States) over New York City (United States) to Munich (Germany)?

□ more than 10 000 km

□ less than 10 000 km?

Please tell us your best estimate for the distance __________________ km.

(6) Please estimate the distance from Sydney (Australia) over Tokyo (Japan) to Shanghai (China)?

□ more than 5000 km

□ less than 5000 km?

Please tell us your best estimate for the distance __________________ km.

(7) Please imagine the following: You are interested in a firm's stocks and consider buying stocks from that firm. However, you hear that one of your friends sells stocks of that firm after having owned them for four years. How would the behavior of your friend influence your own behavior?

□ Positive, I would now prefer to buy those stocks more than before.

□ Neutral, my friend's behavior wouldn’t influence my decision.

□ Negative, I would now rather stay away from buying those stocks.

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Nguyen, T., Schuessler, A. Do they trade as they say? Comparing survey data and trading records. J Asset Manag 14, 37–51 (2013).

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