Abstract

http://ssrn.com/abstract=2021501
 
 

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Do Financial Experts Make Better Investment Decisions?


Andriy Bodnaruk


University of Notre Dame - Mendoza College of Business

Andrei Simonov


Michigan State University - Eli Broad Graduate School of Management; Centre for Economic Policy Research (CEPR); Gaidar Institute for Economic Policy; SITE

July 12, 2012


Abstract:     
We provide direct evidence on the effect of financial expertise on investment outcomes. We analyze private portfolios of mutual fund managers. We find no evidence that financial experts are making better investment decisions than their less financially astute peers: they do not outperform, do not diversify their risks better, and do not exhibit lower behavioral biases. Managers do much better in stocks they share with their mutual funds; however, only about 22% of them have any mutual fund-related positions. Some managers, particularly more experienced ones, seem to be aware of the limitations to their investment skills as they increase their holdings of mutual fund related stocks following bad performance of their portfolio. Our results demonstrate that day-to-day knowledge of finance does not improve investment decisions.

Number of Pages in PDF File: 51

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Date posted: March 15, 2012 ; Last revised: November 1, 2013

Suggested Citation

Bodnaruk, Andriy and Simonov, Andrei, Do Financial Experts Make Better Investment Decisions? (July 12, 2012). Available at SSRN: http://ssrn.com/abstract=2021501 or http://dx.doi.org/10.2139/ssrn.2021501

Contact Information

Andriy Bodnaruk
University of Notre Dame - Mendoza College of Business ( email )
Notre Dame, IN 46556-5646
United States
Andrei Simonov (Contact Author)
Michigan State University - Eli Broad Graduate School of Management ( email )
315 Eppley Center
East Lansing, MI 48824-1122
United States
HOME PAGE: http://www.andreisimonov.com
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Gaidar Institute for Economic Policy ( email )
Moscow
Russia
SITE ( email )
P.O. Box 6501
S-113 83 Stockholm, 11383
Sweden
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