What Do the Portfolios of Individual Investors Reveal About the Cross-Section of Equity Returns?

86 Pages Posted: 2 Mar 2021

See all articles by Sebastien Betermier

Sebastien Betermier

McGill University - Desautels Faculty of Management

Laurent E. Calvet

EDHEC Business School - Department of Economics & Finance; CEPR

Samuli Knüpfer

BI Norwegian Business School; Research Institute of Industrial Economics (IFN)

Jens Kvaerner

Tilburg University

Date Written: March 1, 2021

Abstract

We construct a parsimonious set of equity factors by sorting stocks according to the sociodemographic characteristics of the individual investors who own them. The analysis uses administrative data on the stockholdings of Norwegian investors in 1997-2018. Consistent with financial theory, a mature-minus-young factor, a high wealth-minus-low wealth factor, and the market factor price stock returns. Our three factors span size, value, investment, profitability, and momentum, and perform well in out-of-sample bootstrap tests. The tilts of investor portfolios toward the new factors are driven by wealth, indebtedness, macroeconomic exposure, age, gender, education, and investment experience. Our results are consistent with hedging and sentiment jointly driving portfolio decisions and equity premia.

Keywords: Asset pricing, factor-based investing, household finance, portfolio allocation.

JEL Classification: G11, G12.

Suggested Citation

Betermier, Sebastien and Calvet, Laurent E. and Knüpfer, Samuli and Kvaerner, Jens, What Do the Portfolios of Individual Investors Reveal About the Cross-Section of Equity Returns? (March 1, 2021). Available at SSRN: https://ssrn.com/abstract=3795690 or http://dx.doi.org/10.2139/ssrn.3795690

Sebastien Betermier

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada

Laurent E. Calvet (Contact Author)

EDHEC Business School - Department of Economics & Finance ( email )

France

CEPR ( email )

33 Great Sutton Street
London, EC1V 0DX
United Kingdom

Samuli Knüpfer

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

HOME PAGE: http://www.samuliknupfer.com

Research Institute of Industrial Economics (IFN)

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Jens Kvaerner

Tilburg University ( email )

Warandelaan 2
Tilburg, Noord-Brabant 4818HK
Netherlands
+4740242704 (Phone)

HOME PAGE: http://https://sites.google.com/site/jenskvaerner/

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