Do Individual Investors Have Asymmetric Information Based on Work Experience?
Using a novel dataset covering all individual investors’ stock market transactions in Norway over a 10-year period, we analyze whether individual investors have a preference for professionally close stocks, and whether they make an excess return on such investments. After excluding own-company and previous employer stock, investors hold on average 11 % of their portfolio in stocks within their two-digit industry of employment. Given the poor hedging properties of professionally close stocks, one would expect such investments to be associated with asymmetric information and abnormally high returns. In contrast, all our estimates of abnormal returns are negative, in many cases statistically significant. Overconfidence seems the most likely explanation for why individuals excessively trade in professionally close stocks.
Link al Paper