Hedging, Familiarity and Portfolio Choice

Market states, expectations, sentiment and momentum: How naive are investors?

“…First it proposes, and utilises, a comparison between the expected and actual market price in examining the 12 See, for example, Massa and Simonov (2006) who examine the role of familiarity and find that availability impacts on the investment decisions of some investors.…”

Is local bias a cross-border phenomenon? Evidence from individual investors’ international asset allocation

“…Grinblatt and Keloharju (2001) provide qualitatively similar evidence for private households in Finland. Massa and Simonov (2006) and Bodnaruk (2009) document that Swedish individual investors overweight firms with geographically close premises, while Seasholes et al (2011) and document a local equity preference among Chinese and German retail investors, respectively. Coval and Moskowitz (1999) and Baik et al (2010) show that, while less pronounced in magnitude, local bias is also observed among U.S. fund managers.…”

The Costs and Beliefs Implied by Direct Stock Ownership

“…Massa and Simonov (2006) show that "home" and "industry" bias in stock ownership is likely based on familiarity -a cheap source of information. Engelberg, Sasseville, and Williams (2012) find that stocks recommended by Jim Cramer on his popular television show Mad Money appreciate the following day, presumably because viewers believe his stock picks contain useful information.…”

“…Direct stock ownership has be documented in a variety of data sources, including European tax and survey data (Calvet, Campbell, and Sodini (2007); Massa and Simonov (2006); Christelis, Jappelli, and Padula (2010)), U.S. survey data ; Kelly (1995); Polkovnichenko (2005)), and U.S. brokerage data (Barber and Odean (2000b); Goetzmann and Kumar (2008)), among others. This paper investigates a simple and intuitive explanation for the prevalence of household direct stock ownership: households believe the stocks they own will outperform a more diversified alternative.…”

“…There is little empirical evidence, however, to support these motivations for direct stock ownership (Massa and Simonov (2006); Barber and Odean (2000b); Goetzmann and Kumar (2008)). …”