Terrance Odean


Terrance Odean is the Rudd Family Foundation Professor and Chair of the Finance Group at the Haas School of Business, University of California, Berkeley. He is known for his work on behavioral finance.
After dropping out of Carleton College a half-year short of earning a creative writing degree, Odean applied to return to school at UC, Berkeley at the age of 37. Odean considered studying psychology in grad school. However, Nobel economics laureate, Daniel Kahneman convinced him to pursue a Ph.D. in finance instead. He lives with his wife in Berkeley, California, and has three daughters.

Research

Odean is most known for his research in behavioral finance on investor psychology. The efficient market hypothesis postulates that stock prices reflect all available information in the market. Therefore, an everyday individual investor should be unable to beat the market in the long run. Nonetheless, everyday retail investors often display overconfidence in their ability to choose stocks. Moreover, they pay fees to trade stocks when there is not an advantage in doing so. Barber and Odean showed that men display this behavior more than women, and because men trade more than women, their returns suffered more. Barber and Odean studied the behavior of retail investors who had been trading via a brick and mortar brokerage, to test the effect of investors choosing to move to an online trading platform to minimize their trading fees. Their gross returns were average, but because going online led them to trade more often, their net returns now trailed the overall stock market index.