Individual Investor Activity and Performance

Magnus Dahlquist*, José Vicente Martinez, Paul Söderlind

*Corresponding author for this work

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    Abstract

    We examine the daily activity and performance of a large panel of individual investors from Sweden's Premium Pension System. We find that active investors earn higher returns and risk-adjusted returns than do inactive investors. A performance decomposition analysis reveals that most outperformance by active investors is the result of active 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.

    Original languageEnglish
    JournalReview of Financial Studies
    Volume30
    Issue number3
    Pages (from-to)866-899
    Number of pages34
    ISSN0893-9454
    DOIs
    Publication statusPublished - Mar 2017

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