The Journal of Socio-Economics 40 (2011) 548557

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The Journal of Socio-Economics

journal homepage: www.elsevier.com/locate/soceco

Investors trading activity: A behavioural perspective and empirical results

Dimitrios Kourtidis a, , Z eljko Sevi

c a , Prodromos Chatzoglou b
a
b

Glasgow Caledonian University, Business School, Glasgow, UK

Democritus University of Thrace, Department of Production and Management Engineering, Xanthi, Greece

a r t i c l e

i n f o

Article history:
Received 26 May 2010
Received in revised form 22 February 2011
Accepted 6 April 2011
JEL classication:
C30
D14
G11
O16
Keywords:
Behavioural nance
Trading behaviour
Psychological biases
Personality traits

a b s t r a c t
This study attempts to group investors (individuals and professionals) into different segments based on
their psychological biases and personality traits and, then, to examine whether, and how, these biases
and traits drive their investment behaviour. The behavioural nance literature suggests four main factors
that inuence investment behaviour: overcondence, risk tolerance, self-monitoring and social inuence.
Adopting this approach, a cluster analysis of data from a representative survey of 345 investors in Greece
identied three main segments of investors: high prole investors (a high degree of overcondence,
risk tolerance, self-monitoring and social inuence), moderate prole investors (a moderate level of
overcondence, risk tolerance, self-monitoring and social inuence) and low prole investors (a low
degree of overcondence, risk tolerance, self-monitoring and social inuence). The major nding of the
analysis shows that the higher the investors prole, the higher the performance of these investors on
stock trading. The results will expand investors knowledge about the nancial decision-making process
and trading behaviour.
2011 Elsevier Inc. All rights reserved.

1. Introduction
Traditional nance theories such as Efcient Market Theory
(Fama, 1965a,b) and Modern Portfolio Theory (Markowitz, 1952)
support the hypotheses of rational investors and efcient markets. However, it is obvious that there are irrational investors in
the market, making random transactions that cannot adequately
be explained by traditional nance theories (Chang, 2008).
Many scholars, such as Kahneman and Tversky (1979), believe
that the study of psychology and other social science theories can
shed considerable light on the efciency of nancial markets, as
well as explain many stock market anomalies, market bubbles and
crashes. Thus, a relatively new theory, called behavioural nance,
has emerged in an attempt to understand the human psychological
biases that are related to the nancial markets. In contrast to traditional nance, which examines how people should behave in order
to maximize their wealth, behavioural nance investigates how
people actually behave in a nancial setting (Nofsinger, 2005a).
The behavioural nance literature has developed a number
of behavioural concepts that explain investment behaviour. This
paper reviews some of the most signicant and reliably mea-

Corresponding author.
E-mail addresses: dkourt10@caledonian.ac.uk (D. Kourtidis),
c),
pchatzog@pme.duth.gr (P. Chatzoglou).
Zeljko.Sevic@gcal.ac.uk (Z . Sevi
1053-5357/$ see front matter 2011 Elsevier Inc. All rights reserved.
doi:10.1016/j.socec.2011.04.008

surable concepts to classify investors into proles and, then, to

compare their personal characteristics and their trading behaviour.
The behavioural characteristics (concepts) that have been selected
for classifying investors into proles are: overcondence (OV), risk
tolerance (RT), self-monitoring (SM) and social inuence (SI). Thus,
this paper examines whether the different psychological and personal characteristics lead to differences in investment behaviour
and trading performance among the group of investors with different proles. This framework will, hopefully, help investors
understand how biases and traits affect their investment decisions.
The paper is organized as follows: rst, the paper discusses selected
psychological biases and personality traits that are involved in
behavioural nance. Then, a brief description of the methodology
design is presented and nally the results of the cluster analysis are
presented.

2. Literature review
Although the relevant literature suggests that there are many
factors affecting peoples behaviour, the emphasis there was to
explore the most important psychological biases and personality
traits affecting investment behaviour. These are overcondence,
risk tolerance, self-monitoring and social inuence. An analytic discussion follows in the next sections and an attempt is made to link
them with investment behaviour.

D. Kourtidis et al. / The Journal of Socio-Economics 40 (2011) 548557

2.1. Overcondence
Overcondence causes investors to be too certain about their
own abilities and not to weight the opinion of others sufciently.
Furthermore, overcondent investors underreact to new information, or overweight the value of information, but they also hold
unrealistic beliefs about how high their returns will be (Barber
and Odean, 2000). Chen et al. (2004) examined brokerage accounts
in China and reported that individual investors exhibit overcondence.
In spite of the fact that some studies have found no difference in
overcondence between men and women (Lundeberg et al., 2000;
Deaves et al., 2003; Biais et al., 2005), the majority of the literature
suggests that men are apparently more predisposed to overcondence than women (Lundeberg et al., 1994; Barber and Odean,
2001a). Barber and Odean (2001a) have found that males trade 45%
more actively than females, and earn lower returns, while Shu et al.
(2004) have shown that, even though men trade more excessively
than women, their performance is not dramatically lower than that
of women.
This research assumes that overcondence leads to higher trading frequency and volume. Deaves et al. (2003), and Grinblatt
and Keloharju (2009) for example, have documented that overcondence causes additional trading frequency. Glaser and Weber
(2007) have concluded that The higher the degree of overcondence
of an investor the higher her or his trading volume (Glaser and Weber,
2007, 13). Additionally, Dow and Gorton (1997) have found that
trading volume increases when individuals and insiders are overcondent. Moreover, Gervais and Odean (2001) have found that
overcondent investors trade too aggressively and this increases
the expected trading volume. A similar argument that overcondence leads to greater trading activity is made by Daniel et al.
(2001), Hirshleifer and Luo (2001), Wang (2001) and Scheinkman
and Xiong (2003).
Research has shown that overcondence leads not only to
increased trading activity but also to increased probabilities of taking wrong decisions (e.g. buying the wrong stocks). For example,
Odean (1998) supports that an overcondent trader makes biased
judgements that may lead to lower returns. Similarly, FentonOCreevy et al. (2003) and Philip (2007) have documented that
overcondence has a negative impact on trading performance. On
the other hand, De Long et al. (1990) and Wang (2001) support
that overcondent investors earn higher returns than less condent
investors.
Overcondent investors believe they can achieve high returns,
thus they trade often and they underestimate the associated risks
(Benos, 1998; Odean, 1998; Wang, 2001). Barber and Odean (2001a)
and Chuang and Lee (2006) argue that overcondent investors
underestimate risk and trade more in riskier securities.
Last, the trend of using online brokerage accounts is making
investors more overcondent than ever before. Barber and Odean
(2001b) have provided evidence that investors, after going online,
tend to trade more actively and their performance drops. On the
other hand, Choi et al. (2002) have investigated the performance of
online investors and found no signicant difference in the performance of Web traders and phone traders.
2.2. Risk tolerance
Financial risk tolerance, dened as the maximum amount of
uncertainty that someone is willing to accept when making a nancial
decision, reaches into almost every part of economic and social life
(Grable, 2000, 625).
This study supports the hypothesis that demographics inuence
risk tolerance behaviour. This claim is supported by the following
authors. Schooley and Worden (2003) have found that Gen Xers

549

(dened as being born in 19641980) generally have a low propensity for risk taking. Hira et al. (2007) have found that higher age
decreases risk tolerance, while higher income increases risk tolerance. Cicchetti and Dubin (1994) and Grable et al. (2004) have also
found that people with high incomes have higher risk tolerance
than people with lower incomes.
Roszkowski (1998) and Hartog et al. (2002) assume that single,
rather than married, individuals tend to be more risk tolerant. Similarly, Yao and Hanna (2005) have documented that risk tolerance is
higher for single males, followed by married males, then unmarried
females and then married females. Furthermore, Hariharan et al.
(2000) have investigated the behaviour of investors who are about
to retire and they have found that women are more likely to invest
in risk-free securities than men. Grable et al. (2004) and Weber
et al. (2002) have also found that men are more risk tolerant than
women.
Additionally, the level of formal education is found to inuence risk tolerance. Grable and Lytton (1998) and Sung and Hanna
(1996) suggest that greater levels of attained education are associated with increased risk tolerance. Hallahan et al. (2003) considered
education and marital status but they have not found evidence
to support that they are signicant determinants of individuals
attitude towards risk.
Moreover, Keller and Siergist (2006) argue that nancial risk
tolerance is a signicant positive predictor of willingness to invest
in stocks. Specically, they have found that highly risk-tolerant
investors have high-value portfolios and they trade securities frequently (Keller and Siergist, 2006). Further, Dorn and Huberman
(2005) have investigated the determinants of portfolio diversication and turnover and found that risk-tolerant investors and trade
more aggressively. Additionally, a number of research studies have
found that people who are risk tolerant trade more often than less
risk-tolerant people (Tigges et al., 2000; Wrneryd, 2001; ClarkMurphy and Soutar, 2004; Wood and Zaichkowsky, 2004; Durand
et al., 2008).
2.3. Social inuence
A concept that also explains behavioural dispositions is social
inuence. Social attitude has played an important role in these
attempts to predict and explain human behaviour (Campbell, 1963;
Sherman and Fazio, 1983; Ajzen, 1988). This research supports that
social inuence has an impact on investors trading behaviour. This
claim is also supported by Nofsingers (2005b) ndings. Individual investors discuss with, and are affected by (to an extent), their
family members, neighbors, colleagues and friends, as far as their
investment decisions are concerned (Nofsinger, 2005b). In addition,
investors in nancial markets imitate each other. This phenomenon
is referred to as herding (Hirshleifer and Teoh, 2003). Evidence
of herding behaviour among stock-market participants is Wall
Street, which shares aspects of a crowd (Prechter, 2001). When
a large number of investors make similar decisions, it is a possible
cause of market booms and bursts. This is the reason why the popular press often holds investors tendency to herd as responsible.
Hong et al. (2004) have investigated the participation of households in the stock market and they have concluded that social
households are 4% more likely to invest in the stock market than
nonsocial households. Along the same line, De Marzo et al. (2003)
suggest that individuals form their opinions by interacting with
others and an obvious example is that investors decisions are
usually affected by the recommendations made by friends and/or
analysts. Whereas some studies conrm the existence of herding
in nancial markets (Guedj and Bouchaud, 2005), others do not
(Drehmann et al., 2005).
Furthermore, technological advancements have made the production, retrieval and distribution of information much easier,

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D. Kourtidis et al. / The Journal of Socio-Economics 40 (2011) 548557

Table 1
Questionnaire design.
Construct

Supporting literature

Items

KMO

Cronb.alpha

Overcondence
Risk tolerance
Self-monitoring
Social inuence
Stock transactions
Volume
Frequency
Performance

Wood and Zaichkowsky (2004)

Grable and Lytton (1999)
Biais et al. (2005) and Snyder and Gangestad (1986)
Ajzen (2002)

7
13
18
6

0.817
0.744
0.754
0.781

0.801
0.671
0.447
0.802

0.5
0.5
0.5

0.465
0.571
0.741

Some of them have been adapted from Wood and Zaichkowsky (2004)
and Keller and Siergist (2006)

faster and cheaper than ever before (Johnson, 2001). The Internet
also seems likely to change the information investors look for and
focus on. For instance, the Internet facilitates comparisons of realtime data, and this has changed investors focus by emphasising the
importance of speed and immediacy.
2.4. Self-monitoring
Self-monitoring is a personality trait, a sort of social intelligence. It is a disposition to attend to social cues and to adjust
ones behaviour to ones social environment (Biais et al., 2005).
It refers to the sensibility for what is considered as a desirable
expressive behaviour in different situations and the ability to
control and modify this behaviour (Snyder, 1974). People high
on self-monitoring have greater social sensitivity than people
low on self-monitoring (Snyder, 1987). Individuals high on selfmonitoring alter their expressive self-presentation for the sake
of desired public appearances and are, therefore, highly responsive to social and interpersonal cues of situational appropriate
performances (Snyder and Gangestad, 1986). On the other hand,
individuals low on self-monitoring are not able, or they have no
motivation, to control their expressive self-presentations. Therefore, their expressive behaviour depicts their own feelings and
thoughts, without being concerned much about what would be
right in the social sense.
This research assumes that high self-monitoring inuences
investors trading behaviour. Highly self-monitored people are less
likely to underestimate the extent to which other players actions
are correlated with their information (Eyster and Rabin, 2005) and,
thus, they should avoid the winners curse (because of incomplete
information and emotional bidders, there is a difculty in determining an items intrinsic value). Indeed, Biais et al. (2005) have
found that investors high on selfmonitoring are unlikely to fall into
winners curse traps and behave strategically, achieving high stock
returns. Further, Alemanni and Franzosi (2006) have found that
self-monitoring increases trading frequency.
3. Methodology
This study attempts to group investors (individuals and professionals) into different segments based on their psychological
biases and personality traits and, then, to examine whether, and
how, these biases and traits drive their investment behaviour. The
selected factors that classify investors into proles through cluster
analysis are the following: overcondence, risk tolerance, selfmonitoring and social inuence. This study makes an attempt to
conrm the relationship between these factors, also taking into
account differences in the investors proles and their trading
behaviour.
3.1. Questionnaire design
A structured questionnaire was constructed and used as the
main survey instrument. First of all, an extensive pretesting with

2
2
2

professional and individual investors took place in an attempt to

improve the format of the questions. The questionnaire was delivered to the research subjects face to face, to allow the researcher
to discuss with the participants the main aims of the research and
provide them with all the necessary explanations in order to eliminate possible mistakes in the understanding and completion of the
questionnaires.
The questionnaire includes seventy-two questions that collect
information about investment behaviour, while it is divided into
two sections. The rst section is based on the four main constructs. Overcondence is measured by seven items (ve point
Likert scale) that have been adapted from Wood and Zaichkowsky
(2004). Furthermore, the thirteen items (multiple choices) measuring risk tolerance have been adapted from Grable and Lytton
(1999). Six items (ve-point Likert scale) measuring social inuence and eighteen items measuring self-monitoring have been
adapted from Ajzen (1991) and Biais et al. (2005), respectively.
The second section includes questions about participants stock
transactions (in their private portfolios). There are six questions
included, collecting information about their portfolio value, stock
volume, stock returns, protable transactions and frequency of
stock transactions. Additionally, ten questions focus on information
about peoples investing behaviour, such as types of stocks held
and sources of investment information. Moreover, twelve demographic and socioeconomic items are included in this section. All
the necessary statistical tests have been performed to verify construct validity and to conrm the reliability and validity of the
research instrument. The Cronbach alpha statistic has been used
to determine the degree of consistency among the measurements
of each construct. The nal constructs and their internal reliability
are shown in Table 1.
3.2. Sample description
The questionnaires were distributed to individuals who make
stock transactions and had at least two transactions in 2007 on
the ASE (Athens Stock Exchange), as well as professional investors
(including portfolio analysts as well as stockbrokers) who work
in various investment companies all over the country (in order to
achieve the maximum geographical distribution).
A total of 200 professional investors from 80 investment
companies and 400 individual investors were contacted face
to face. The individual investors who positively responded
(through face-to-face contact) totalled 263, while 83 professional
investors successfully responded to the questionnaire. Therefore,
the response rate for the face-to-face distribution was 66% for individuals and 42% for professional investors.
Additionally, 67 questionnaires (including a prepaid stamped
envelope) were distributed by mail to 42 investment companies (phone contact had previously conrmed their willingness to
answer the questionnaire) in all over the country. In a few weeks,
18 of them were returned completed. Therefore, the response rate
on questionnaires via mail was 26.8%.
The total number of questionnaires returned was 373. However,
28 questionnaires (individuals) were omitted since some questions

D. Kourtidis et al. / The Journal of Socio-Economics 40 (2011) 548557

551

Table 2
Psychological biases and personality traits.
Average
n = 345
Mean
Overcondence
Risk tolerance
Self-monitoring
Social inuence

24.00
27.73
10.32
13.16

St.D.
5.12
4.83
2.44
4.14

High prole (HP)

n = 118

Moderate prole (MP)

n = 115

Low prole (LP)

n = 112

Mean

Mean

Mean

St.D.

19.52
25.39
8.52
11.28

3.83
3.94
1.57
3.38

27.42
31.61
11.52
16.05

St.D.
4.14
4.00
2.84
3.31

had been left unanswered. Thus, the total number of valid questionnaires was 345. Of these, 235 questionnaires were completed
by individuals and 110 questionnaires were completed by professionals.
4. Results
Once the constructs had been dened, an overall score for each
of them was calculated. Cluster analysis examines whether respondents scored similarly on a set of variables and seeks to identify
a set of groups with the greatest possible distinction (Keller and
Siergist, 2006). This study used K-means cluster analysis because
this method is appropriate (unlike hierarchical clustering) for large
data sets (n > 250). Due to the fact that some variables were measured on different scales, they were standardised to assume equal
impact on the computation of the distances between cases. A range
(25) of clusters was tested and the greatest distinctiveness (with
the appropriate signicance) among the groups was provided by a
3-cluster solution. The results suggest that 3 signicant subgroups
exist within the investor sample, each with different psychological
and personality characteristics (Table 2).
In addition, an ANOVA test has shown a statistically signicant difference (p < 0.05) between the clusters for all the constructs
(Table 3). Interpreting the results of this table, each investor segment identied could be labelled as follows: high prole investors,
moderate prole investors and low prole investors. High prole
investors are those who have the following characteristics as far
as the four main constructs examined are concerned: high degrees
of overcondence, risk tolerance, self-monitoring and social inuence. Moderate prole investors are those who score moderately
on overcondence, risk tolerance, self-monitoring and social inuence, whereas low prole investors are those who have a low
degree of overcondence, risk tolerance, self-monitoring and social
inuence. To validate the distinctiveness of the clusters, independent sample t-tests were conducted on the mean ratings of each of
the four constructs between clusters (Table 3). The results indicate
the existence of statistically signicant differences between each
cluster (except for the risk tolerance of low and moderate prole
investors). We also ran crosstabulations between clusters for several demographic and trading characteristics. A detailed discussion
of the ndings from these analyses is provided in the next sections.
4.1. Prole analysis
4.1.1. High prole investors
The majority (83%) of the respondents were men, which does
not differ much between proles (Table 4). High prole investors

HP-MP

HP-LP

MP-LP

0.000*
0.000*
0.002*
0.000*

0.000*
0.000*
0.000*
0.000*

0.000*
0.223
0.000*
0.066*

Signicant differences at p < 0.005.

24.87
26.03
10.85
12.02

3.83
3.86
1.52
3.97

119.68
87.97
52.83
102.37

Table 4
Demographic and socioeconomic prole of clusters.
HP
n = 118

MP
n = 115

LP
n = 112

83%
17%

86%
14%

86%
14%

77%
23%

29%
32%
24%
12%
3%

34%
34%
23%
7%
2%

26%
33%
22%
14%
5%

27%
30%
26%
15%
2%

27%
48%
25%

19%
39%
42%

30%
54%
16%

34%
50%
16%

9%
41%
28%
19%
3%

7%
37%
22%
28%
6%

12%
39%
26%
21%
2%

10%
46%
36%
8%
0%

68%
32%

42%
58%

77%
23%

88%
12%

Average
n = 345
Gender
Male
Female
Age
2535
3645
4655
5665
>65
Educational level
High-school
University
Master
Income level
<15,000
15,00030,000
30,00050,000
50,000100,000
>100,000
Type
Individual
Professional

are mainly young respondents with 68% of them being less than
45 years old (relatively younger than the investors in the other
groups), having a higher educational level (42% of them hold a Master degree) and having a signicantly (Table 5) higher income level
(34% of them earn more than 50,000 euros annually) than investors
in the other 2 proles. Additionally, the high prole includes signicantly more professionals than any of the other 2 groups.
The primary characteristic of this group is the high score on all
the psychological biases and traits compared with the scores of the
same traits of the other 2 groups of investors (Table 2). Thus, high
prole investors have signicantly higher overcondence (mean
27.42) than investors in any other group. This is expected due to
the large amount of professionals included in this prole. Kourtidis
et al. (2011) have found that that professionals score higher on
psychological biases and personality traits (overcondence, risk
tolerance, social inuence, and self-monitoring) compared to the
individual investors. As Chen et al. (2004) have found, experienced
investors are more prone to overreact due to behavioural biases.
Furthermore, Grifn and Tversky (1992) have documented evidence that experts are more overcondent than non-experts.

Table 5
Signicance between demographic and socioeconomic prole of clusters.

Table 3
Signicance between psychological biases and personality traits.

Overcondence
Risk tolerance
Self-monitoring
Social inuence

St.D.

Gender
Age
Educational level
Income level
Type
*

HP-MP

HP-LP

MP-LP

0.938
0.032*
0.010*
0.041*
0.000*

0.059*
0.057*
0.000*
0.000*
0.000*

0.072*
0.774
0.056*
0.115
0.032*

Signicant differences at p < 0.005.

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D. Kourtidis et al. / The Journal of Socio-Economics 40 (2011) 548557

Table 6
Basic trading pattern of clusters.

Portfolio value
Stock volume
Stock returns
Protable stock transactions

Average
n = 345
Mean

HP
n = 118
Mean

69.411
8.916
14.08
55.77

111.136
13.542
20.86
60.25

MP
n = 115
Mean
62.211
6.599
11.30
54.33

LP
n = 112
Mean
32.845
6.421
9.81
52.53

In addition, these investors also have higher risk tolerance

(mean 31.61) than investors in any other group. This can be
explained by the fact that low age, high income and high educational level (which characterize investors who belong to this
prole) are correlated with high risk tolerance. More specically,
Hira et al. (2007) have found that both low age and high income
increase risk tolerance. Similarly, Cicchetti and Dubin (1994) and
Grable et al. (2004) have found that people with a high income
level have higher risk tolerance than people with lower incomes.
Moreover, Grable and Lytton (1998) suggest that greater levels of
attained education are associated with increased risk tolerance.
High risk tolerance can also be explained by the large number of
professionals included in this prole. There are studies that show
a positive relation between risk taking and experience (Hong et al.,
2000; Lamont, 2002).
Also, there is evidence in the literature suggesting that high
overcondence is associated with high risk tolerance and, more
specically, some research studies conclude that overcondent
investors underestimate risk taking (Barber and Odean, 2001a;
Wang, 2001; Chuang and Lee, 2006). Additionally, a statistically
signicant positive relationship has been found between overcondence and risky assets, which is similar to other studies (Benos,
1998; Odean, 1998; Wang, 2001). Moreover, self-monitoring (mean
11.52) and social inuence (mean 16.05) are signicantly higher in
the high prole investors group compared with investors from the
other two groups.

lower than the respective degree of professionals. Furthermore,

Grifn and Tversky (1992) have found that non-experts are less
overcondent than experts.
Moreover, they are signicantly less risk tolerant (mean 25.39)
compared with high prole investors (but without having a statistically signicant difference from the moderate prole investors).
This can be explained by the high age, low income and low educational level that the investors with this prole have, which are
found to be related to risk intolerance. More specically, Hira et al.
(2007) have found that higher age and lower income decreases risk
tolerance. Similarly, Cicchetti and Dubin (1994) and Grable et al.
(2004) have found that people with low incomes have lower risk
tolerance than people with higher incomes. Low risk tolerance can
also be explained by the fact that more individuals are included
in this prole than in any of the other proles. There are previous
studies that have examined the level of investors (in)experience
and their risk (in)tolerance and have found that there is a statistically signicant relationship between these two parameters (Hong
et al., 2000; Lamont, 2002). Additionally, another parameter that
may inuence the level of risk tolerance of investors in this prole is that the number of women included in this prole is higher
than in any of the other two proles. Weber et al. (2002) and Grable
et al. (2004) claim that women are less risk tolerant than men. Also,
low prole investors are low self-monitoring (mean 8.52) investors
and they have a signicantly lower degree of social inuence (mean
11.28) compared with the other groups.

4.1.2. Moderate prole investors

Moderate prole investors are signicantly older (41% of them
are above 45 years old) and have a signicantly lower educational
level (only 16% hold a Master degree) and lower income (only 23%
earn more than 50,000 euros annually) than high prole investors
(Table 4). However, there is no statistically signicant difference
between moderate and low prole investors (as far as age, education and income level are concerned). This group has a moderate
prole, as far as the psychological biases and personality traits are
concerned, which means that their levels of overcondence (mean
24.87), risk tolerance (mean 26.03), self-monitoring (mean 10.85)
and social inuence (12.02) range between the high and low prole
investors level of means (Table 2).

4.2. Trading behaviour

4.1.3. Low prole investors

The group of low prole investors includes a signicantly lower
percentage of men than the high prole investors. Further, they
are signicantly older (43% of them are above 45 years old) and
have a signicantly lower educational level (only 16% hold a Master degree) and a signicantly lower income than the investors
included in the high prole group. In addition, this group of
investors mainly consists of individual investors (88%) in contrast
to the high prole investors group where 58% are professionals.
The major characteristic of this group of investors is the low
score on all the psychological biases and traits, which characterizes
investors who are included in this group. Low prole investors have
a low score on overcondence (mean 19.52), which may be due to
their small investment experience. Glaser and Weber (2005) have
found that individuals degree of overcondence is signicantly

Table 6 presents the trading characteristics of the 3 proles. In

detail, the respondents reported that their average portfolio value
is about 70,000 euros while each stock transaction is about 9000
euros. Regarding their stock performance, they claim that their
average stock return is about 14%, while their protable stock transactions are about 56% of the total number of transactions.
Moreover, the respondents were asked to describe their portfolio allocation (Table 6). The results have shown that, on average,
55% of their portfolio is invested in stocks, 24% in saving accounts
and the remaining 21% in mutual funds, bonds and other investment products. It is interesting to see that these people mainly
invest in ASE 20 (blue chips), 53% of their stock portfolio, while the
remaining 47% is invested in stocks of rms with medium or small
capitalisation. Another nding worth mentioning is that 42% of
the respondents admitted that they insist on buying some specic
stocks despite their consistently bad performance. It is not surprising, therefore, that it is found that the majority (61%) of investors
do not have a clear investment policy when they buy stocks. Only
20% of the participants follow a stop loss policy, 17% prefer a max
prot policy and 16% adopt a target price policy (Table 7).
In addition, the respondents were asked to dene the major factor that signicantly inuences their investment decisions. They
reported that the most important factors are the negative climate in the Athens Stock Exchange (21%), the stock prospects
(15%) and various personal/psychological reasons (10%). Additionally, the respondents were asked to dene the information
sources they use during their decision-making process. The ndings

D. Kourtidis et al. / The Journal of Socio-Economics 40 (2011) 548557

Table 7
Signicance between basic trading pattern of clusters.

Portfolio value
Stock volume
Stock returns
Protable stock transactions
*

553

Table 8
Other trading characteristic of clusters.

HP-MP

HP-LP

MP-LP

0.066*
0.017*
0.020*
0.050*

0.000*
0.016*
0.023*
0.012*

0.086*
0.869
0.811
0.561

Signicant differences at p < 0.005.

reveal that newspapers, TV news, and fundamental and technical

analyses are the most important information sources (Table 8).
As it is probably expected, investors with different proles differ as far as their attitude towards stock trading is concerned. A
detailed discussion about these differences follows in the next few
paragraphs.
4.2.1. High prole
This is the most experienced group as far as investments are
concerned (70% of them have more than 10 years of investment
experience). Regarding their investment horizon, fewer of them
(48%) invest on a long-term basis, compared with investors from the
other proles with a similar strategy. On the other hand, the number of high prole investors following a medium-term investment
strategy is signicantly higher (37%) than the number of medium
or low prole investors who follow a similar strategy (Table 8).
Surprisingly, even though short-term investment was expected
to be more popular among high prole investors, since investors in
this prole trade more frequently, it was found that the percentage
of them following this strategy is higher (but with no signicance)
only compared with the percentage of moderate prole investors
who follow a similar strategy. This result contradicts that of Wood
and Zaichkowsky (2004), who found that overcondent investors
have a shorter investment horizon than low condent investors.
Moreover, they have a signicantly higher portfolio value (average 111,136 euros) compared with low and moderate prole
investors. The higher portfolio value of this group may be explained
by the large number of professional investors who are included in
this group. Sharma (2006) has found that professional investors
invest larger amounts than non-professional investors. Coval et al.
(2005) also claim that individual traders almost always trade
smaller positions than professional traders.
Furthermore, high prole investors have higher stock volume
(average 13,542 euros per transaction) compared with investors in
the other 2 groups. Glaser et al. (2003) has documented that the
higher the stock portfolio value, the higher is the average trading
volume per stock market transaction. In addition, there are lots of
studies that relate the high degree of overcondence (high prole
investors are overcondent) and trading volume. For example, Dow
and Gorton (1997), Gervais and Odean (2001) and Glaser and Weber
(2007) suggest that the higher the degree of ones overcondence,
the higher the trading volume.
Additionally, they check stock prices more frequently (86% of
them check stock prices daily) and, also, trade more frequently (32%
make stock transactions at least weekly) than investors in either of
the other 2 groups. This trading behaviour may be the result of high
overcondence, high risk tolerance and good investment experience. To support this argument, Deaves et al. (2003) and Grinblatt
and Keloharju (2009) have found that overcondence increases
trading frequency. Moreover, a number of studies have shown that
risk-tolerant investors trade more frequently than risk-intolerant
investors (Tigges et al., 2000; Wrneryd, 2001; Clark-Murphy and
Soutar, 2004; Wood and Zaichkowsky, 2004; Dorn and Huberman,
2005; Durand et al., 2008). Also, Shapira and Venezia (2001) have
found that professionals trade much more frequently than individuals. Further, Alemanni and Franzosi (2006) have found that high

Investment experience
<5 years
510 years
>10 years
Check stock prices
Daily
Weekly
Fortnightly
Monthly
Quarterly
Frequency of stock transact.
Daily
Weekly
Fortnightly
Monthly
Quarterly
Semi-annually
Investment horizon
Long term
Medium term
Short term
Portfolio allocation
Saving accounts
Mutual funds
Bonds
Stocks
Other investments
Stock indexes
ASE 20
ASE 40
ASE 80
Other
Insistence in stocks with bad
performance
Investment policy*
Stop loss
Max prot
Target price
Wait and see
Investment information*
TV news
Newspaper
Balance sheet
Fundamental analysis and
technical analysis
Financial announcements
Internet
Financial analysts
Friends
Relatives
Roumors
Investment decision making
Athens Stock Exchange
Stock prospects
Personal/psychological reasons
Returns
International stock exchanges
Liquidity
*

Average
n = 345

HP
n = 118

MP
n = 115

LP
n = 112

17%
34%
49%

10%
20%
70%

17%
36%
47%

24%
46%
30%

62%
17%
2%
10%
9%

86%
7%
1%
5%
1%

61%
21%
2%
8%
8%

37%
25%
3%
17%
18%

12%
8%
7%
18%
14%
41%

21%
11%
12%
25%
15%
16%

10%
8%
8%
15%
17%
42%

4%
5%
2%
14%
11%
64%

56%
31%
13%

48%
37%
15%

62%
29%
9%

58%
26%
16%

24%
12%
6%
55%
3%

26%
10%
4%
55%
5%

24%
10%
7%
56%
3%

24%
17%
6%
52%
1%

54%
22%
12%
12%
42%

52%
24%
13%
11%
46%

57%
18%
13%
12%
52%

51%
24%
10%
15%
30%

20%
17%
16%
61%

19%
19%
25%
60%

18%
23%
17%
53%

23%
10%
4%
70%

37%
40%
34%
36%

40%
42%
54%
64%

37%
33%
39%
38%

36%
44%
14%
14%

34%
28%
19%
12%
4%
12%

42%
40%
19%
6%
1%
9%

39%
28%
19%
9%
4%
11%

24%
18%
20%
20%
8%
15%

30%
19%
18%
14%
10%
9%

28%
15%
24%
15%
13%
5%

30%
32%
4%
13%
13%
8%

35%
15%
12%
15%
6%
17%

The respondents can choose more than one answer.

self-monitoring (as high prole investors have) increases trading

frequency.
The most important nding is that investors from the high prole group report signicantly higher stock returns (average 21%)
and signicantly more protable stock transactions (average 60%)
than investors in the other groups. This is expected as there are
other studies that underline the relationship between high overcondence and stock prots. De Long et al. (1990) and Wang (2001),
for example, have found support for overcondent investors earning higher returns than less condent investors. In addition, Biais
et al. (2005) have found that high self-monitoring investors earn

554

D. Kourtidis et al. / The Journal of Socio-Economics 40 (2011) 548557

higher stock returns than low self-monitoring investors. Further,

Statman and Thorley (1999) claim that high stock returns are correlated with a high trading volume. The high stock returns of this
group may again be explained by the large amount of professional investors. Chen et al. (2004), investigating the mean Monday
returns, have found that professional investors stock portfolios
earn higher returns than the non-professional investors stock portfolios. Additionally, Kourtidis et al. (2011), comparing professional
and individual investors, have shown evidences that professionals
have higher performance than the individual ones as far as stock
trading is concerned.
What was probably not expected is the favourable investment
policy the people of this group prefer. It is found that 60% of them
prefer the wait and see policy. However, another 63% (the sum is
higher than 100% because they could choose more than one option)
make use of the target price (25%), max prot (19%) and stop loss
(19%) investment policies. It is reasonable then to assume that most
of the high prole investors always have in mind a plan B strategy.
Of course, this plan B seems to differ depending on the prole each
investor belongs to. More specically, high prole investors prefer
the target price policy, while moderate prole investors prefer
the max prot policy. On the other hand, low prole investors
denitely prefer the stop loss policy.
The most signicant sources of information are the fundamental and technical analyses (64%) followed by balance sheets (54%)
and nancial announcements (42%). These sources have a signicantly greater impact on high prole investors than on investors of
either of the other 2 proles. This was rather expected since high
prole investors trade more frequently than other investors. Wood
and Zaichkowsky (2004), for example, have found that overcondent investors (as high prole investors are), rely more heavily on
nancial statements.
The investment decision making of most (28%) of the high prole
investors is mainly inuenced by the environment of the Athens
Stock Exchange. Stock prospects, their personal and psychological
status and stock returns are the other more inuential parameters.
In addition, almost half (46%) of the high prole investors admit
that they insist on holding or even buying specic stocks despite
their consistently bad performance. Surprisingly, almost the same
number (52%) of the moderate prole investors but only 30% of
the low prole investors exhibit a similar investment behaviour
(Table 9).
4.2.2. Moderate prole
The investment experience of moderate prole investors is signicantly less than high prole investors (only 47% have more
than 10 years of investment experience) but signicantly higher
than low prole investors. They have a moderate portfolio value
(62,211 euros) which is signicantly less than the portfolio value
of high prole investors but (insignicantly) higher than the portfolio value of the low prole investors. Their stock volume (6599
euros per transaction) is signicantly less than that of the high prole investors but it does not signicantly differ from that of the low
prole investors. Furthermore, the frequency of stock transactions,
the level of stock returns and the protable stock transactions are
moderate (signicantly different compared with the investors of
the 2 other proles except for protable stock transactions between
the moderate and low proles) compared with the stock returns
of the investors in the 2 other proles (Table 4). Moderate prole
investors have also reported that their preferred investment policy is wait and see (53%). In the second place of their preferences
is the max prot policy (23%), which is different from the second
option of the high prole investors (target price, 25%) and the low
prole investors (stop loss, 23%).
Further, as far as the sources on investment information are concerned, moderate prole investors are signicantly inuenced by

Table 9
Signicance between other trading characteristic of clusters.

Investment
experience
Check stock prices
Frequency of stock
transact.
Investment horizon
Long term
Medium term
Short term
Portfolio allocation
Saving accounts
Mutual funds
Bonds
Stocks
Other investments
Stock indexes
ASE 20
ASE 40
ASE 80
Other
Insistence in stocks
with bad
performance
Investment policy
Stop loss
Max prot
Target price
Wait and see
Investment information*
TV news
Newspaper
Balance sheet
Fundamental
analysis and
technical
analysis
Financial
announcements
Internet
Financial analysts
Friends
Relatives
Roumors
Investment decision making
Athens Stock
Exchange
Stock prospects
Personal/psychological
reasons
Returns
International stock
exchanges
Liquidity
*

HP-MP

HP-LP

MP-LP

0.001*

0.000*

0.015*

0.000*
0.000*

0.000*
0.000*

0.000*
0.001*

0.015*
0.145
0.079

0.095*
0.037*
0.803

0.513
0.521
0.070

0.632
0.857
0.233
0.988
0.190

0.556
0.040*
0.492
0.478
0.042*

0.907
0.069*
0.648
0.491
0.469

0.224
0.063
0.847
0.734
0.736

0.935
0.876
0.263
0.235
0.005*

0.233
0.140
0.367
0.403
0.015*

0.811
0.457
0.180
0.274

0.493
0.057*
0.000*
0.134

0.359
0.009*
0.002*
0.010*

0.432
0.579
0.040*
0.000*

0.362
0.163
0.000*
0.000*

0.896
0.402
0.000*
0.023*

0.367

0.000*

0.008*

0.022*
0.818
0.570
0.092
0.262

0.008*
0.763
0.000*
0.007*
0.115

0.713
0.942
0.001*
0.250
0.646

0.044*

0.003*

0.320

0.013*
0.952

0.516
0.355

0.067*
0.328

0.751
0.740

0.712
0.074*

0.957
0.098

0.632

0.076

0.183

Signicant differences at p < 0.005.

nancial announcements, fundamental and technical analyses and

balance sheets but also by TV news, newspapers and the Internet. In addition, stock prospects and the Athens Stock Exchange
environment have a signicant impact while personal and psychological reasons also play their role in the decision-making process
of investors in the moderate prole group.

4.2.3. Low prole

Low prole investors have less investment experience than
investors in any other group (only 30% have more than 10 years
of investment experience). They check stock prices rarely (37%
of them check stock prices daily) and also invest in stocks rarely
(only 4% of them make stock transactions daily while 64% of them
semi-annually). This may be explained by the risk intolerance that
characterizes investors in this prole.

D. Kourtidis et al. / The Journal of Socio-Economics 40 (2011) 548557

A number of studies have shown that risk-intolerant investors

trade less frequently than risk-tolerant investors (Tigges et al.,
2000; Wrneryd, 2001; Clark-Murphy and Soutar, 2004; Wood
and Zaichkowsky, 2004; Dorn and Huberman, 2005; Durand et al.,
2008). Moreover, this would be a result of the large number of individuals in the prole. Shapira and Venezia (2001) have found that
individuals trade less frequently than professionals.
Furthermore, low prole investors have a signicantly lower
portfolio value (32,845 euros) and lower stock volume (6421 euros
per transaction) than high and prole investors and medium prole
investors (with the exception of stock volume, which is not statistically signicantly different from that of moderate prole investors).
The low portfolio value of this group may again be explained by the
large amount of individual investors, which is in line with Sharma
(2006). For example, Coval et al. (2005) and Sharma (2006) claim
that individual investors trade smaller positions than professional
investors. The main nding is that stock returns (9.81%) are signicantly less than those of investors in any other group, while
the protable stock transactions (52.53%) are signicantly lower
compared with those of high prole investors (there was no statistically signicant relationship with moderate prole investors).
This may be explained by the low condence level that low prole investors have. De Long et al. (1990) and Wang (2001) suggest
that less condent investors earn lower returns than overcondent investors. In addition, Biais et al. (2005) have found that low
self-monitoring investors earn lower stock returns than high selfmonitoring investors.
Further, they have a higher level of short-term investments
compared with moderate prole investors, which is also slightly
higher than the high prole investors. On the other hand, there
is a signicantly lower level of medium-term investments compared with high prole investors (there is no statistically signicant
difference from moderate prole investors). Their sources of investment information mainly include newspapers (44%) and TV news
(36%) and the impact of friends is signicantly higher than in any
other investors proles (maybe because they have lower investment experience).
As far as the investment policy followed is concerned, while
low prole investors prefer (except for the wait and see policy
of 70%) the stop loss policy (23%), there is no signicant difference
between all the other investors proles. Additionally, they have a
signicantly lower preference for max prot (10%) and target price
policy (4%) compared with the other investors groups.
Low prole investors reported that mainly the Athens Stock
Exchange has a signicantly greater impact on their investment
decision making than high prole investors (without having a
statistically signicant difference from the moderate prole).
Specically, low prole investors are more inuenced by their liquidity than the other two groups. This was expected since this group
has a lower income level. Additionally, investors with a low prole
who insist on buying specic stocks (in spite of their bad performance) are fewer than the investors from the other two proles
who have the same investing behaviour.

5. Summary and conclusions

Based on the evidence provided by the literature it becomes
apparent that investors stock trading behaviour (including stock
performance, stock volume and stock frequency) is affected by
personality traits and psychological biases (overcondence, risk
tolerance, self-monitoring, social inuence).
However, it should be stressed that each of these psychological
biases affect in a different way each of the three dimensions of
trading behaviour examined in this study. For example, although,
overcondence positively affects stock trading volume (Dow and

555

Gorton, 1997; Glaser and Weber, 2007; Deaves et al., 2003), as well
as stock trading frequency (Alemanni and Franzosi, 2006; Grinblatt
and Keloharju, 2009; Glaser and Weber, 2007), the evidences about
its relation with stock performance are both positive (De Long et al.,
1990; Wang, 2001) as well as negative (Barber and Odean, 2001a;
Benos, 1998; Daniel et al., 1998; Odean, 1998; Philip, 2007).
The main concern, therefore, is that one should look at the relationships between trading behaviour dimensions and the various
psychological biases at an one-to-one basis in order to be able to
come up with a meaningful conclusion concerning the overall effect
at these biases on trading behaviour.
In this study, cluster analysis identied three investor proles,
the low, moderate and high investor proles, with each one of them
exhibiting different trading behaviour. The results of the analysis
show that the higher the investors prole, the higher the performance of these investors on stock trading. Unfortunately, one may
assume that the characteristics of high prole investors lead to a
winning strategy in stock markets. In this research, high prole
investors are those scoring high levels on the psychological biases
and personality traits examined. Specically, they are overcondent and risk-tolerant investors with, also, a high degree of social
inuence and self-monitoring, who have better performance than
investors from other proles. Thus, these investors own high-value
portfolios, trade high volumes of stocks and make transactions
more frequently compared with investors from the other proles.
Therefore, high trading frequency and high stock volume do not
negatively affect investment performance but may lead, under specic conditions, to a better performance. Also, high risk taking
and high overcondence seem to inuence stock returns positively
(high prole investors results).
Furthermore, high prole investors, among other sources of
investment information, emphasise the information provided by
fundamental and technical analyses and, generally, nancial statements. Some other characteristics of investors in this prole are the
target price investment policy they adopt and their large investment experience. High prole investors trading behaviour may
be explained by the large proportion of professional investors
(Shapira and Venezia, 2001; Sharma, 2006) who are included in
this group, but also by their high degree of overcondence, risk tolerance and self-monitoring (Wang, 2001; Biais et al., 2005; Dorn
and Huberman, 2005; Durand et al., 2008; Grinblatt and Keloharju,
2009). On the other hand, low prole investors underperform in
stock markets, trade rarely and their major characteristics, compared with the investors in other groups, are their low scores on
psychological biases, personality traits and investment experience.
Additionally, moderate prole investors level of psychological
biases, personality traits and trading performance is somewhere
between the high prole and low prole levels.
This is an exploratory study to be used as a starting point for
the understanding of the characteristics (overcondence, risk tolerance, social inuence, self-monitoring) of investors (including
both individuals and professionals) and their trading behaviour.
The results show that high scores on psychological biases and personality traits (thus overcondence, risk tolerance, social inuence
and self-monitoring) are associated with high scores on aspects of
trading behaviour such as trading performance, trading frequency
and trading volume. This study may provide investment advisors
with a framework to understand clients attitude and thus allow
advisors to give better advice to their clients depending on each
clients prole. Finally, this study also offers insights into investors,
as they can understand the trading behaviour of each investors prole and compare it with their own investment characteristics, their
trading behaviour and their performance. Ultimately, it will provide a framework that will help investors understand how biases
and traits affect investment decisions and thus they may be able to
become aware of and overcome them.

556

D. Kourtidis et al. / The Journal of Socio-Economics 40 (2011) 548557

One major limitation of this study is that it is based on the

self-assessed biases, traits and trading behaviour of each respondent. It is important for future research to be directed towards
collecting more objective data as far as these crucial parameters
are concerned.
Moreover, it is not clear which are the stronger parameters
that actually inuence trading behaviour. Further research could
expand the scope of this research by examining the magnitude of
the effect of these parameters on investor trading behaviour. Also,
a direct comparison between individual and professional investors
trading behaviour would enhance our knowledge/comprehension
of investors trading behaviour.

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