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Naïve Buying Diversification and Narrow Framing by Individual Investors

Gathergood, John; Hirshleifer, David; Leake, David; Sakaguchi, Hiroaki; Stewart, Neil


David Hirshleifer

David Leake

Hiroaki Sakaguchi

Neil Stewart


We provide the first tests to distinguish whether individual investors equally balance their overall portfolios (naïve portfolio diversification-NPD) or, in contrast, equally balance the values of same-day purchases of multiple assets (naïve buying diversification-NBD). We find NBD in purchases of multiple stocks, and in mixed purchases of individual stocks and funds. In contrast, there is little evidence of NPD. Evidence suggest NBD arises due to stock picking behaviour and neglect of diversification. These findings suggest that behavioral finance theory should incorporate transaction as well as portfolio framing.


Gathergood, J., Hirshleifer, D., Leake, D., Sakaguchi, H., & Stewart, N. (in press). Naïve Buying Diversification and Narrow Framing by Individual Investors. Journal of Finance,

Journal Article Type Article
Acceptance Date Jun 8, 2022
Deposit Date Oct 17, 2022
Journal Journal of Finance
Print ISSN 0022-1082
Electronic ISSN 1540-6261
Publisher Wiley
Peer Reviewed Peer Reviewed
Keywords investor behavior; portfolio allocation; naïve diversification; narrow fram- ing JEL Codes: G11
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