Abstract

http://ssrn.com/abstract=2023588
 


 



Just Unlucky? – A Bootstrapping Simulation to Measure Skill in Individual Investors’ Investment Performance


Steffen Meyer


Goethe University Frankfurt - Department of Finance

Dennis Schmoltzi


Goethe University Frankfurt - Department of Finance

Christian Stammschulte


Goethe University Frankfurt - House of Finance

Simon Kaesler


Goethe University Frankfurt - Department of Finance

Benjamin Loos


Goethe University Frankfurt - Department of Finance

Andreas Hackethal


Goethe University Frankfurt - Department of Finance

June 6, 2012


Abstract:     
Few studies have focused on the measurement of individual investors’ investment performance and more extensive research has been conducted on biases and investment mistakes – such as the disposition effect, security selection bias and lacking ability of market timing. No study so far has focused on measuring whether the realized performance was driven by skill or mere luck. This paper disentangles skill and luck in individual investors’ investment performance using a four-factor model and apply bootstrapping simulations pioneered in the mutual fund literature to distinguish skill from luck. We use a comprehensive dataset of 8,621 individual investor portfolios from a German online broker, spanning a timeframe from September 2005 to April 2010. We find that 89% of individual investors exhibit negative skill (α ≤ 0) when measured on a gross basis and 91% when considering returns net of costs and expenses. An individual investor with an average level of risk-taking depicts an investment performance of approximately -7.5% per year for gross returns and of -8.5% per year for net returns.

Number of Pages in PDF File: 42

Keywords: individual investors, retail investors, portfolio performance, investment policy, bootstrapping

JEL Classification: D14, G11

working papers series


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Date posted: March 20, 2012 ; Last revised: June 6, 2012

Suggested Citation

Meyer, Steffen and Schmoltzi, Dennis and Stammschulte, Christian and Kaesler, Simon and Loos, Benjamin and Hackethal, Andreas, Just Unlucky? – A Bootstrapping Simulation to Measure Skill in Individual Investors’ Investment Performance (June 6, 2012). Available at SSRN: http://ssrn.com/abstract=2023588 or http://dx.doi.org/10.2139/ssrn.2023588

Contact Information

Steffen Meyer (Contact Author)
Goethe University Frankfurt - Department of Finance ( email )
Grüneburgplatz 1
Frankfurt am Main, DE 60323
Germany
Dennis Schmoltzi
Goethe University Frankfurt - Department of Finance ( email )
Mertonstr. 17
Frankfurt, 60054
Germany
Christian Stammschulte
Goethe University Frankfurt - House of Finance ( email )
Grüneburgplatz 1
Frankfurt am Main, 60323
Germany
Simon Kaesler
Goethe University Frankfurt - Department of Finance ( email )
Grüneburgplatz 1
Frankfurt am Main, 60323
Germany
Benjamin Loos
Goethe University Frankfurt - Department of Finance ( email )
Grüneburgplatz 1
Frankfurt am Main, 60323
Germany
Andreas Hackethal
Goethe University Frankfurt - Department of Finance ( email )
House of Finance
Grueneburgplatz 1
Frankfurt am Main, Hessen 60323
Germany
+49 69 79833700 (Phone)
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