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A behavioral analysis of investor diversification

Fuertes, A-M. ORCID: 0000-0001-6468-9845, Muradoglu, G. & Ozturkkal, B. (2014). A behavioral analysis of investor diversification. The European Journal of Finance, 20(6), pp. 499-523. doi: 10.1080/1351847x.2012.719829


This paper studies the link between individual investors’ portfolio diversification levels and various personal traits that proxy informational advantages and overconfidence. The analysis is based on objective data from the largest Turkish brokerage house tracking 59,951 individual investors’ accounts with a total of 3,248,654 million transactions over the period 2008–2010. Wealthier, highly educated, older investors working in the finance sector and those trading relatively often show higher diversification levels possibly because they are better equipped to obtain and process information. Finance professionals, married investors, and those placing high-volume orders through investment centers show poorer diversification possibly as a reflection of overconfidence. Our analysis reveals important nonlinear effects, implying that the marginal impact of overconfidence on diversification is not uniform across investors but varies according to the investor's information gathering and processing abilities.

Publication Type: Article
Additional Information: This is an Accepted Manuscript of an article published by Taylor & Francis in The European Journal of Finance on 28 Nov 2012, available online:
Publisher Keywords: Individual investor; Behavioural finance; Diversification; Portfolio risk; Emerging market.
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School > Finance
Related URLs:
SWORD Depositor:
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