44 Pages Posted: 1 Nov 2011 Last revised: 1 Jun 2016
Date Written: May 31, 2016
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: 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
By Andrew Ang