Online Investors: What They Want, What They Do, and How Their Portfolios Perform
32 Pages Posted: 5 Dec 2010 Last revised: 19 Jun 2014
Date Written: September 20, 2011
For 5,500 individual online investors we match survey records with recent trading data to investigate what they want, in terms of their stated objectives for investing, what they do, in terms of the broad investing strategies they employ, and how their portfolios perform in terms of risk, return, turnover, and diversification. Our results show that speculation is an important investment objective, and is related to a higher turnover of stocks and derivatives, as well as riskier returns. In contrast, while the proportion of individual online investors saving for retirement is relatively low, those who do have this as their objective display a lower turnover of stocks and hold less concentrated portfolios. Individual online investors rely strongly on technical analysis as an investing strategy, which goes hand in hand with a higher turnover of stocks and derivatives, more concentrated portfolios, lower returns, and higher risk. Finally, a large fraction of the individual online investors in our sample rely on their intuition as an investing strategy, which is associated with a higher turnover of stocks.
Keywords: Individual Investors, Behavioral Biases, Investment Decisions, Investor Performance
JEL Classification: G11, G24
Suggested Citation: Suggested Citation