Abstract
This research aims at analyzing the practice of stock diversification by individual investors in the Indonesia Stock Exchange (IDX). The first argument underlying this research is the portfolio behavioral theory of Shefrin and Statman (2000) which stated that investors arranged their portfolio like a layered pyramid with the bottom layer for protection (downside) and the top layer for profit (upside), and they put their stock portfolio on the top layer. Another argument underlying this research is the importance of the three moment model (mean, variance and skewness) in the individual investor's decision to diversify (Mitton and Vorkink, 2007). Using ordered logit and ordinary least squares models for the sample obtained, this study finds that skewness is the sole significant factor explaining the decision on stock underdiversification by individual investors in the IDX. This finding supports the underdiversification phenomenon of Mitton & Vorkink (2007).
| Original language | English |
|---|---|
| Pages (from-to) | 137-148 |
| Number of pages | 12 |
| Journal | International Journal of Applied Business and Economic Research |
| Volume | 15 |
| Issue number | 19 |
| Publication status | Published - 2017 |
Keywords
- Diversification practice
- Individual stock investor
- Skewness