University of Stavanger (UiS)
Jan 2025.
Abstract
We investigate households understanding of diversification by investigating their decisions to
add one stock to their existing equity portfolio. This is a situation where households have
already decided to participate in the stock market. This decision is more likely to accurately
reflect understanding of diversification. We use data for the equity portfolios of all Norwegian
households. We find that when households add a stock to their portfolio, the chosen stock has
high correlation with the household's current portfolio, higher than would be achieved by chosing
a stock at random.
Keywords: Household Finance; Equity Portfolio Diversification
JEL Codes: D14; G02; G11;
Talks