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Self-Enhancing Transmission Bias and Active Investing

Date: Thursday, June 23rd, 14:00—16:00

Location:317, Ge Zhi Building, Liu Lin Campus

The public lecture

Given by

Professor: Han Bing

Toronto University


Individual investors often invest actively and lose thereby. Social interaction seems to exacerbate this tendency. In our model, senders' propensity to discuss their strategies' returns, and receivers' propensity to be converted are increasing in sender return. A distinctive implication is that the rate of conversion of investors to active investing is convex in sender return. Unconditionally, active strategies (high variance, skewness, and personal involvement) dominate the population unless the return penalty to active investing is too large. Thus, the model can explain overvaluation of `active' asset characteristics even when investors have no inherent preference over them. In contrast with nonsocial approaches, sociability and other features of the sending and receiving processes are determinants of the popularity of active investing and the pricing of active strategies.

Before:Development, challenges and predication of the framework of Chinese monetary policy

Next:Individual Preferences for Foreign Direct Investment (FDI) in Developing Countries: Experimental Evidence from China


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