Investor Behavior, Benchmarks and Investment Flows: Norwegian and International Evidence

This project incorporates new techniques, new questions, new perspectives and new data. Financial models have long been tested empirically, but include no behavioral elements. As the need to explain market inefficiencies has become more pressing, behavior al models have emerged. These, however, are seldom tested outside experimental laboratories, if even there. This project is unique in that we test empirically all of the behavioral models we develop. We are able to do this by developing quantifiable proxi es for behavioral variables, and thus providing our results with the authenticity researchers often claim behavioral work lacks. Our new questions include the identification and elucidation of a new market anomaly, reverse home bias. We also provide a new , behavioral, perspective on questions which have been previously investigated. These are the relationship between investor performance and risk tolerance, and the roots of international home bias. Finally, the Norwegian corporate ownership database, whic h lists detailed monthly portfolios for every individual and institutional investor in the Norwegian market, has never before been employed in behavioral research, yet is clearly of inestimable value in this field.