Terry Odean's guest appearances

Terry Odean

NGPF Podcast

Video Insights – UBS Wealth Management Research

The Long View

Brave New World -- hosted by Vasant Dhar

unSILOed with Greg LaBlanc

Stuart Russell

Meir Statman

Aswath Damodaran

Michael Mauboussin

Paul Merriman

Liz Ann Sonders

Sallie Krawcheck

Jason Zweig

David Burkus

Jill Schlesinger

Ramit Sethi

Judson Brewer

Ben Hunt

Scott Kupor

Andrew Yang

OwlTail

Our guest on the podcast today is Terrance Odean. Dr. Odean is the Rudd Family Foundation Professor of Finance at the Haas School of Business at the University of California, Berkeley. Individual investor trading has been a key area of research throughout his academic career. In 2016, Dr. Odean received the James R. Vertin Award from the CFA Institute for research notable for its relevance and enduring value to investment professionals. He has been an editor and an associate editor of numerous academic finance journals, including The Review of Financial Studies, The Journal of Finance, and The Journal of Behavioral Finance. As an undergraduate student at UC Berkeley, Dr. Odean studied judgment and decision-making with a 2002 Nobel Laureate in Economics, Daniel Kahneman.BackgroundBioThe Review of Financial StudiesThe Journal of FinanceThe Journal of Behavioral FinanceFree Trading and Robinhood“Online Investors: Do the Slow Die First?” by Brad Barber and Terrance Odean, faculty.haas.berkeley.edu, 2002.“The Behavior of Individual Investors,” by Brad Barber and Terrance Odean, umass.edu, September 2011.“Attention Induced Trading and Returns: Evidence From Robinhood Users,” by Brad Barber, Xing Huang, Terrance Odean, and Christopher Schwarz, paper.ssrn.com, Oct. 12, 2021.“Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors,” by Brad Barber and Terrance Odean, faculty.haas.berkeley.edu, April 2000.“All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors,” by Brad Barber and Terrance Odean, academic.oup.com, April 2008.“Robbin’ Who?” by William Ehart, humbledollar.com, May 11, 2021.“Systematic Noise,” by Brad Barber, Terrance Odean, papers.ssrn.com, May 2006.Gender Differences in Investing“Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment,” by Brad Barber and Terrance Odean, papers.ssrn.com, November 1998.“Seeing Is Believing: Female Leaders’ Presence Narrows the Gender Gap in Girls’ Aspirations and Advancement in Education,” by Lori Beaman, Esther Duflo, Rohini Pande, and Petia Topalova, gap.hks.harvard.edu, February 2012.“What Accounts for the Gender Equality Among Pharmacists?” by Claudia Goldin, premarket.org, Oct. 7, 2021.Behavioral FinanceDaniel Kahneman

Our guest on the podcast today is Terrance Odean. Dr. Odean is the Rudd Family Foundation Professor of Finance at the Haas School of Business at the University of California, Berkeley. Individual investor trading has been a key area of research throughout his academic career. In 2016, Dr. Odean received the James R. Vertin Award from the CFA Institute for research notable for its relevance and enduring value to investment professionals. He has been an editor and an associate editor of numerous academic finance journals, including The Review of Financial Studies, The Journal of Finance, and The Journal of Behavioral Finance. As an undergraduate student at UC Berkeley, Dr. Odean studied judgment and decision-making with a 2002 Nobel Laureate in Economics, Daniel Kahneman.Background<a href="https://haas.berkeley.edu/faculty/odean-terrance/" rel="nofollow" target="_blank">Bio</a><a href="https://academic.oup.com/rfs" rel="nofollow" target="_blank">The Review of Financial Studies</a><a href="https://onlinelibrary.wiley.com/journal/15406261" rel="nofollow" target="_blank">The Journal of Finance</a><a href="https://so06.tci-thaijo.org/index.php/IJBS" rel="nofollow" target="_blank">The Journal of Behavioral Finance</a>Free Trading and Robinhood“<a href="https://faculty.haas.berkeley.edu/odean/papers%20current%20versions/online%20rfs.pdf" rel="nofollow" target="_blank">Online Investors: Do the Slow Die First?</a>” by Brad Barber and Terrance Odean, <a href="http://faculty.haas.berkeley.edu" rel="nofollow" target="_blank">faculty.haas.berkeley.edu</a>, 2002.“<a href="https://www.umass.edu/preferen/You%20Must%20Read%20This/Barber-Odean%202011.pdf" rel="nofollow" target="_blank">The Behavior of Individual Investors</a>,” by Brad Barber and Terrance Odean, <a href="http://umass.edu" rel="nofollow" target="_blank">umass.edu</a>, September 2011.“<a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3715077" rel="nofollow" target="_blank">Attention Induced Trading and Returns: Evidence From Robinhood Users</a>,” by Brad Barber, Xing Huang, Terrance Odean, and Christopher Schwarz, <a href="http://paper.ssrn.com" rel="nofollow" target="_blank">paper.ssrn.com</a>, Oct. 12, 2021.“<a href="https://faculty.haas.berkeley.edu/odean/papers%20current%20versions/individual_investor_performance_final.pdf" rel="nofollow" target="_blank">Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors</a>,” by Brad Barber and Terrance Odean, <a href="http://faculty.haas.berkeley.edu" rel="nofollow" target="_blank">faculty.haas.berkeley.edu</a>, April 2000.“<a href="https://academic.oup.com/rfs/article-abstract/21/2/785/1607197" rel="nofollow" target="_blank">All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors</a>,” by Brad Barber and Terrance Odean, <a href="http://academic.oup.com" rel="nofollow" target="_blank">academic.oup.com</a>, April 2008.“<a href="https://humbledollar.com/2021/05/robbin-who/" rel="nofollow" target="_blank">Robbin’ Who?</a>” by William Ehart, <a href="http://humbledollar.com" rel="nofollow" target="_blank">humbledollar.com</a>, May 11, 2021.“<a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=474481" rel="nofollow" target="_blank">Systematic Noise</a>,” by Brad Barber, Terrance Odean, <a href="http://papers.ssrn.com" rel="nofollow" target="_blank">papers.ssrn.com</a>, May 2006.Gender Differences in Investing“<a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=139415#:~:text=Terrance%20Odean,-University%20of%20California&amp;text=Psychological%20research%20has%20established%20that,and%20perform%20worse%20than%20women." rel="nofollow" target="_blank">Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment</a>,” by Brad Barber and Terrance Odean, <a href="http://papers.ssrn.com" rel="nofollow" target="_blank">papers.ssrn.com</a>, November 1998.“<a href="https://gap.hks.harvard.edu/female-leadership-raises-aspirations-and-educational-attainment-girls-policy-experiment-india" rel="nofollow" target="_blank">Seeing Is Believing: Female Leaders’ Presence Narrows the Gender Gap in Girls’ Aspirations and Advancement in Education</a>,” by Lori Beaman, Esther Duflo, Rohini Pande, and Petia Topalova, <a href="http://gap.hks.harvard.edu" rel="nofollow" target="_blank">gap.hks.harvard.edu</a>, February 2012.“<a href="https://promarket.org/2021/10/07/gender-equality-pharmacists-career-family-goldin/" rel="nofollow" target="_blank">What Accounts for the Gender Equality Among Pharmacists?</a>” by Claudia Goldin, <a href="http://premarket.org" rel="nofollow" target="_blank">premarket.org</a>, Oct. 7, 2021.Behavioral Finance<a href="https://scholar.princeton.edu/kahneman/home" rel="nofollow" target="_blank">Daniel Kahneman</a>

Terry Odean: Who's on the Other Side of the Trade?

How do we pick the stocks we buy? What drives us to sell? How does new technology impact our attention and behavior? Terrance Odean joins Vasant Dhar in episode 23 of Brave New World to share his learnings over a lifetime of studying behavioral finance.  Useful resources: 1. Terrance Odean's videos on Investing. 2.Terrance Odean's video series on individual investor behavior. 3. All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors -- Brad M Barber &amp; Terrance Odean. 4. Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors -- Brad M Barber &amp; Terrance Odean. 5. The Behavior of Individual Investors --  Brad M Barber &amp; Terrance Odean. 6. Zero-Commission Individual Investors, High Frequency Traders, and Stock Market Quality -- Gregory W Eaton, T Clifton Green, Brian Roseman &amp; Yanbin Wu. 7. Thinking Fast and Slow -- Daniel Kahneman. 8. Daniel Kahneman on How Noise Hampers Judgement -- Episode 21 of Brave New World 9. Dissecting “Noise” — Vasant Dhar. 10. The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence -- Hersh Shefrin &amp; Meir Statman. 11. Day-trading reality check: humans are poor investors and even worse traders -- Vasant Dhar. 12. Seinfeld: George Does the Opposite.

How do we pick the stocks we buy? What drives us to sell? How does new technology impact our attention and behavior? Terrance Odean joins Vasant Dhar in episode 23 of Brave New World to share his learnings over a lifetime of studying behavioral finance. Useful resources: 1. <a href="https://www.youtube.com/playlist?list=PLt461dTvJ65KZjI9ATb4Of2IIqiBB_6AZ" rel="noopener nofollow" target="_blank">Terrance Odean's videos</a> on Investing. 2.<a href="https://www.youtube.com/playlist?list=PLt461dTvJ65I3pxRl8RB-EbVMtB2_I-Ao" rel="noopener nofollow" target="_blank">Terrance Odean's video series on individual investor behavior</a>. 3. <a href="http://faculty.haas.berkeley.edu/odean/papers%20current%20versions/allthatglitters_rfs_2008.pdf" rel="noopener nofollow" target="_blank">All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors</a> -- Brad M Barber &amp; Terrance Odean. 4. <a href="https://faculty.haas.berkeley.edu/odean/papers%20current%20versions/individual_investor_performance_final.pdf" rel="noopener nofollow" target="_blank">Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors</a> -- Brad M Barber &amp; Terrance Odean. 5. <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1872211" rel="noopener nofollow" target="_blank">The Behavior of Individual Investors</a> --  Brad M Barber &amp; Terrance Odean. 6. <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3776874" rel="noopener nofollow" target="_blank">Zero-Commission Individual Investors, High Frequency Traders, and Stock Market Quality</a> -- Gregory W Eaton, T Clifton Green, Brian Roseman &amp; Yanbin Wu. 7. <a href="https://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman-ebook/dp/B005MJFA2W/ref=sr_1_1?keywords=thinking+fast+and+slow&amp;qid=1634131998&amp;sr=8-1" rel="noopener nofollow" target="_blank">Thinking Fast and Slow</a> -- Daniel Kahneman. 8. <a href="https://bravenewpodcast.com/episodes/2021/09/16/episode-21-daniel-kahneman-on-how-noise-hampers-judgement/" rel="noopener nofollow" target="_blank">Daniel Kahneman on How Noise Hampers Judgement</a> -- Episode 21 of Brave New World 9. <a href="https://lareviewofbooks.org/article/dissecting-noise/" rel="noopener nofollow" target="_blank">Dissecting “Noise”</a> — Vasant Dhar. 10. <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1540-6261.1985.tb05002.x" rel="noopener nofollow" target="_blank">The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence</a> -- Hersh Shefrin &amp; Meir Statman. 11. <a href="https://www.marketwatch.com/story/day-trading-tales-remind-us-that-humans-are-poor-investors-and-even-worse-traders-2020-06-25" rel="noopener nofollow" target="_blank">Day-trading reality check: humans are poor investors and even worse traders</a> -- Vasant Dhar. 12. <a href="https://www.youtube.com/watch?v=1Y_6fZGSOQI" rel="noopener nofollow" target="_blank">Seinfeld: George Does the Opposite</a>.

Ep 23: Terry Odean on How to Think about Investing

Do individual traders and institutional investors suffer from psychological bias? This episode features an interview with Terry Odean, Rudd Family Foundation Professor and Chair of the Finance Group at the Haas School of Business at the University of California, Berkeley. He shares his journey from dropping out of a seminary to hitchhiking in Afghanistan, driving a cab in the 1970s, to starting his own statistical software company. Discover what Nobel economics laureate, Daniel Kahneman, has to do with career change and ending up in behavioral finance. Terrance shares his findings on the difference in buying and investing behaviors between institutional and individual investors. Together with host Greg La Blanc, he unpacks the investment data he gathered from Taiwan. He offers well-founded insights into investing data before, during, and after the war and through the dot com bubble in 1998-2000.  Tune in till the end as he briefly touches on some of his work related to the disposition effect and a recent paper he wrote about the Robinhood app and the GameStop fiasco in 2020.Episode Quotes:What drew you to study individual investors?"I thought institutional investors, most of them are human. They have human biases. However, they've had more opportunities to learn. And, I didn't know how much learning had or hadn't taken place, but I thought, well, individuals are. Far less likely to have had the opportunity to learn that they are behaving suboptimally, that their biases are causing them to make mistakes. The other reason that I wanted to look at individual investors? The other reason that I wanted to look at individual investors? This is because I initially wanted to avoid conflating behavioral biases and agency issues. And what I mean by that is those individual investors, especially at discount brokerage firms. And I got my initial data sets from a discount. Brokerage firms are making decisions for themselves at the time. This firm did not provide financial advisors and advice that's changed. But when I got my data set, individuals made their own decisions. It was relatively straightforward to say this is a person making a financial decision that will directly affect their wealth."What drives the market upwards?"Another thing that drives markets up is when more and more people put their money in the market. And one of the things that cause people to put their money in the market is that the market is going up...It has probably be tied to a story or something. And then it tends to snowball a little bit, as they say, use of margin, the use of margin was way up in 1999. I believe probably high at the moment. The use of margin by individual investors, the willingness to borrow money. So it's to buy more stock. The stock market is a secondary market. It's generally people trading stocks that already exist. If you want to buy it, a stock, you have to offer someone who already owns it enough money. They're willing to sell it. If they're the one who wants to sell, they have to sell it to you at a price where you're willing to buy. If there are a lot of people who want to buy and the people who currently own are content, then that starts to drive the price up because the buyers have to bid up the price to get the people who want it to sell."Thoughts on taking risks and stock markets as a substitute for risk-taking and lottery:  "And you're right in the study that I mentioned before where we looked at all Taiwanese investors. We had a little, almost an aside in that paper. We took a look at when Taiwan instituted a national lottery. And that's not to say that you couldn't gamble in Taiwan before the national lottery. There were ways to gamble, but they instituted the national lottery. And we have a little model of expected, trading on the Taiwanese stock exchange and trading fell 25% when the lottery came in. And what we thought was going on is a lot of these people are trading, and turnover was very high. The individual investor turnover would be three, four, or 500%. That means that every stock gets bought. Say if it's 500%, every stock gets bought and sold. Every share of every stock, on average, gets bought and sold five times a year. So there is clearly a lot of speculation going on, and we thought, well, a bunch of people just said, oh, this week, this month, I'm going to try the lottery instead of gambling on the stock market."People at all levels are susceptible to psychological biases to some degree, and will it be helpful to do a psychological hygiene process on a regular basis to alert themselves to any of the biases that they may be succumbing to?"Professional investors, they're also human. And they have many of the same biases. I think they have had more learning opportunities. So as you say, hedge fund managers consciously try to recognize and deal with their own biases, be aware of them, and watch out for them. And certainly, that helps. So knowing that you have these biases is useful, but it doesn't instantly stop you from being influenced by them. I think institutional investors sometimes come up with checks, balances, protocols. For example, there's something called the disposition effect. And that was for the tendency of people to hold onto their losses and sell their winning investments. So things they had done well."Show LinksGuest ProfileTerrance Odean on LinkedInTerrance Odean on TwitterTerrance Odean Faculty Profile at Haas Business School, UC BerkeleyHis WorkJournals on Google ScholarHow Robinhood’s trading app spurs investors’ herding instincts: Q&amp;A with Prof. OdeanMediating Investor AttentionRobinhood Traders: Wisdom of the Crowd? or Not?

Do individual traders and institutional investors suffer from psychological bias? This episode features an interview with Terry Odean, Rudd Family Foundation Professor and Chair of the Finance Group at the Haas School of Business at the University of California, Berkeley. He shares his journey from dropping out of a seminary to hitchhiking in Afghanistan, driving a cab in the 1970s, to starting his own statistical software company. Discover what Nobel economics laureate, <a href="https://en.wikipedia.org/wiki/Daniel_Kahneman" rel="nofollow" target="_blank">Daniel Kahneman</a>, has to do with career change and ending up in behavioral finance. Terrance shares his findings on the difference in buying and investing behaviors between institutional and individual investors. Together with host Greg La Blanc, he unpacks the investment data he gathered from Taiwan. He offers well-founded insights into investing data before, during, and after the war and through the dot com bubble in 1998-2000.  Tune in till the end as he briefly touches on some of his work related to the disposition effect and a recent paper he wrote about the Robinhood app and the GameStop fiasco in 2020.<h3>Episode Quotes:</h3>What drew you to study individual investors?"I thought institutional investors, most of them are human. They have human biases. However, they've had more opportunities to learn. And, I didn't know how much learning had or hadn't taken place, but I thought, well, individuals are. Far less likely to have had the opportunity to learn that they are behaving suboptimally, that their biases are causing them to make mistakes. The other reason that I wanted to look at individual investors? The other reason that I wanted to look at individual investors? This is because I initially wanted to avoid conflating behavioral biases and agency issues. And what I mean by that is those individual investors, especially at discount brokerage firms. And I got my initial data sets from a discount. Brokerage firms are making decisions for themselves at the time. This firm did not provide financial advisors and advice that's changed. But when I got my data set, individuals made their own decisions. It was relatively straightforward to say this is a person making a financial decision that will directly affect their wealth."What drives the market upwards?"Another thing that drives markets up is when more and more people put their money in the market. And one of the things that cause people to put their money in the market is that the market is going up...It has probably be tied to a story or something. And then it tends to snowball a little bit, as they say, use of margin, the use of margin was way up in 1999. I believe probably high at the moment. The use of margin by individual investors, the willingness to borrow money. So it's to buy more stock. The stock market is a secondary market. It's generally people trading stocks that already exist. If you want to buy it, a stock, you have to offer someone who already owns it enough money. They're willing to sell it. If they're the one who wants to sell, they have to sell it to you at a price where you're willing to buy. If there are a lot of people who want to buy and the people who currently own are content, then that starts to drive the price up because the buyers have to bid up the price to get the people who want it to sell."Thoughts on taking risks and stock markets as a substitute for risk-taking and lottery:  "And you're right in the study that I mentioned before where we looked at all Taiwanese investors. We had a little, almost an aside in that paper. We took a look at when Taiwan instituted a national lottery. And that's not to say that you couldn't gamble in Taiwan before the national lottery. There were ways to gamble, but they instituted the national lottery. And we have a little model of expected, trading on the Taiwanese stock exchange and trading fell 25% when the lottery came in. And what we thought was going on is a lot of these people are trading, and turnover was very high. The individual investor turnover would be three, four, or 500%. That means that every stock gets bought. Say if it's 500%, every stock gets bought and sold. Every share of every stock, on average, gets bought and sold five times a year. So there is clearly a lot of speculation going on, and we thought, well, a bunch of people just said, oh, this week, this month, I'm going to try the lottery instead of gambling on the stock market."People at all levels are susceptible to psychological biases to some degree, and will it be helpful to do a psychological hygiene process on a regular basis to alert themselves to any of the biases that they may be succumbing to?"Professional investors, they're also human. And they have many of the same biases. I think they have had more learning opportunities. So as you say, hedge fund managers consciously try to recognize and deal with their own biases, be aware of them, and watch out for them. And certainly, that helps. So knowing that you have these biases is useful, but it doesn't instantly stop you from being influenced by them. I think institutional investors sometimes come up with checks, balances, protocols. For example, there's something called the disposition effect. And that was for the tendency of people to hold onto their losses and sell their winning investments. So things they had done well." <h3>Show Links</h3>Guest Profile<ul><li><a href="https://www.linkedin.com/in/terrance-odean-a9886111/" rel="nofollow" target="_blank">Terrance Odean on LinkedIn</a></li><li><a href="https://twitter.com/terranceodean?lang=en" rel="nofollow" target="_blank">Terrance Odean on Twitter</a></li><li><a href="https://haas.berkeley.edu/faculty/odean-terrance/" rel="nofollow" target="_blank">Terrance Odean Faculty Profile at Haas Business School, UC Berkeley</a></li></ul> His Work<ul><li><a href="https://scholar.google.com/citations?hl=en&amp;user=ubzu7jQAAAAJ" rel="nofollow" target="_blank">Journals on Google Scholar</a></li><li><a href="https://newsroom.haas.berkeley.edu/how-robinhoods-trading-app-spurs-investors-herding-instincts-prof-terrance-odean/" rel="nofollow" target="_blank">How Robinhood’s trading app spurs investors’ herding instincts: Q&amp;A with Prof. Odean</a></li><li><a href="https://www.youtube.com/watch?t=89s&amp;v=uBBalFEzspE" rel="nofollow" target="_blank">Mediating Investor Attention</a></li><li><a href="https://www.youtube.com/watch?t=2s&amp;v=uYSBNSPLUCw" rel="nofollow" target="_blank">Robinhood Traders: Wisdom of the Crowd? or Not?</a></li></ul>

Financial Behavior and Psychological Biases: Lessons from the Accidental Economist feat. Terry Odean