8.2

Question 1

Except of overconfidence, what else can be a rational explanation

Answer 1

Entertainment => turnover should vary across indv depending on their self-reported enjoyment of investing and gambling

Question 2

3 reasons for entertainment

Answer 2

1. Recreational trading = feeling of accomplishment
   - they have to overcome less of a hurdle when changing portfolio. Lower MC.
   - Follow financial market actively_higher exposure to trading signals
2. Sensation seeking = seeking for intensity & novelty.
3. Aspiration for Riches = extreme results (positively skewed) and impatient to reach for desired level wealth => results in more trading

Question 3

2 type investors

Answer 3

1. Hobby
2. Gambles: aspiration for riches
   - younger
   - male
   - less wealthy
   - more concentrated in equity -> more volatility, provides necessary stimuli that increases the chance of reaching desired wealth level

Question 4

Entertainment driven investors…

Answer 4

Have an increase in excess turnover

Question 5

Mc/MArginal benefit for inv that love trading

Answer 5

Mc is offset by non pecuniary benefits from researching, executing and talking about the outcome of the trade

Question 6

Self-enhancing attribution bias

Answer 6

Tendency to overestimate one”s knowledge. Tendency to overly attribute success to skill and losses to external factors

Question 7

Illusion of control

Answer 7

Wrong expectation to be able to affect chance outcomes

Question 8

Churning

Answer 8

Excess trading. (Done by broker to receive more commission = illegal)