Individual Investor Activity and Performance

44 Pages Posted: 1 Nov 2011 Last revised: 1 Jun 2016

Magnus Dahlquist

Stockholm School of Economics

Jose Vicente Martinez

University of Connecticut

Paul Söderlind

University of St. Gallen; Centre for Economic Policy Research (CEPR); University of St. Gallen - School of Finance

Multiple version iconThere are 5 versions of this paper

Date Written: May 31, 2016

Abstract

We examine the daily activity and performance of a large panel of individual investors in Sweden's Premium Pension System. We find that active investors earn significantly higher returns and risk-adjusted returns than inactive investors. A performance decomposition analysis reveals that most of the outperformance of active investors is the result of these investors successfully timing mutual funds and asset classes. While activity is beneficial for some investors, extreme flows out of mutual funds affect funds' net asset values negatively for all investors. Financial advisors, by contributing to coordinate investments and redemptions, exacerbate these negative effects.

Keywords: 401(k), coordinated fund changes, defined contribution, financial advisors, mutual fund flows

JEL Classification: G11, G23, H55

Suggested Citation

Dahlquist, Magnus and Martinez, Jose Vicente and Söderlind, Paul, Individual Investor Activity and Performance (May 31, 2016). Swedish House of Finance Research Paper No. 14-08 (revised version). Available at SSRN: https://ssrn.com/abstract=1952850 or http://dx.doi.org/10.2139/ssrn.1952850

Magnus Dahlquist

Stockholm School of Economics ( email )

Drottninggatan 98
Stockholm, SE-111 60
Sweden

Jose Vicente Martinez

University of Connecticut ( email )

2100 Hillside Road, Unit 1041
Storrs, CT 06269
United States

Paul Söderlind (Contact Author)

University of St. Gallen ( email )

Rosenbergstrasse 52
St. Gallen, 9000
Switzerland
+41 71 224 7064 (Phone)
+41 71 224 7088 (Fax)

HOME PAGE: http://https://sites.google.com/site/paulsoderlindecon/home

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

University of St. Gallen - School of Finance ( email )

Rosenbergstrasse 52
St.Gallen, CH-9000
Switzerland

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