A PORTRAIT OF THE INDIVIDUAL INVESTOR

Behavioral finance models often rely on a concept of noise traders who are prone to judgment and decision-making errors. What do noise trade rs do? We review prior research and present new survey evidence on the behavior of small individual investors who manage their own equity po rtfolios. Many people(1) discover naive patterns in past price movemen ts, (2) share popular models of value, (3) are not properly diversifie d, and (4) trade in suboptimal ways. (C) 1998 Elsevier Science B.V. Al l rights reserved.