Barber and Odean (2000) Ranked Portfolios by Turnover and Report

question 6

Multiple Choice

Barber and Odean (2000) ranked portfolios by turnover and report that the difference in return between the highest and lowest turnover portfolios is 7% per year. They attribute this to

• A) overconfidence.
• B) framing.
• C) regret avoidance.
• D) sample neglect.

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Definitions:

Interest Receivable

An accounting term for interest income that has been earned but not yet received in cash.

Debt Investments

Investments made in bonds or other debt instruments, where the investor lends money in exchange for interest payments.

Amortization

The allocation of the cost of an intangible asset to expense over its useful life in a systematic and rational manner.

Stock Investments

Purchases of shares in other companies, intended as a long-term investment or to exert control or influence over those companies.