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Consumer Biases and Competences in Company Stock Holdings


  • The authors would like to acknowledge the grant to Christine Lai from National Science Council in Taiwan (95-2745-H-155-003-HPU).


Consumers may make inefficient investment decisions in holding their own-company stocks because of several biases documented by the literature of behavioral economics, such as company stock bias, home bias, and mere exposure effect. Consumers with high levels of competences may be likely to overcome biases and make effective investment decisions. Using data from the 2004 and 2007 Surveys of Consumer Finances, evidence suggests the existence of the biases and competences, whereas a higher level of consumer competence can partially offset the influence of consumer biases.