Experience as a Driver of Individual Investor's Product Class Choice

46 Pages Posted: 21 Jul 2020

See all articles by Marina Mukhamadieva

Marina Mukhamadieva

Goethe University Frankfurt - Department of Finance

Date Written: September 1, 2019

Abstract

I use an administrative dataset from a large German discount broker to investigate the influence of individual investors' experience on investment product choices. I find that the probability to trade warrants increases with investor experience (approximated by account tenure, months of active trading or number of purchases). Account tenure has a negative impact on bonds, funds and certificates trading, whereas number of active months and purchases increases the probability to trade in all product classes. However, the impact of these variable on market entry is not the same: the probability to enter bond and fund markets decreases with experience, and increases for other products. When relating investors' product choices with previous account performance, recent highest and lowest returns stimulate warrant trading, whereas in the long term it is only related to lowest return quintile.

Keywords: household finance, individual investor, portfolio choice, learning, experience

JEL Classification: D14, G11

Suggested Citation

Mukhamadieva, Marina, Experience as a Driver of Individual Investor's Product Class Choice (September 1, 2019). Available at SSRN: https://ssrn.com/abstract=3637965 or http://dx.doi.org/10.2139/ssrn.3637965

Marina Mukhamadieva (Contact Author)

Goethe University Frankfurt - Department of Finance

House of Finance
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, Hessen 60323
Germany

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