Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
Institute for Financial Research SIFR Research Report Series, Institute for Financial Research

No 25:
All Guts, No Glory: Trading and Diversification among Online Investors

Anders E.S. Anderson

Abstract: I explore cross-sectional portfolio performance in a sample containing 324,736 transactions conducted by 16,831 investors at an Internet discount brokerage firm during the period May 1999 to March 2002. On average, investors hold undiversified portfolios, show a strong preference for risk, and trade aggressively. I measure performance using a panel data model, and explain the cross-sectional variation using investors’ turnover, portfolio size and degree of diversification. I find that turnover is harmful to performance due to fees, and is therefore more predominant among investors with small portfolios. It is argued that the degree of diversification is a proxy for investor skill, and it has a separate and distinct positive effect on performance. These findings are helpful in explaining the overall result that investors underperform the market by around 8.5% per year on average.

Keywords: Investor behavior; Performance evaluation; Panel data models; (follow links to similar papers)

JEL-Codes: C33; D14; G11; (follow links to similar papers)

52 pages, April 19, 2004

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

sifr-wp25.pdf    PDF-file
Download Statistics

Questions (including download problems) about the papers in this series should be directed to Anki Helmer ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:sifrwp:0025 This page was generated on 2014-12-14 19:26:49