What Matters to Individual Investors? Evidence from the Horse's Mouth

Working Paper No. 25019 We survey a representative sample of U.S. individuals about how well leading academic theories describe their financial beliefs and decisions. We find substantial support for many factors hypothesized to affect portfolio equity share, particularly background risk, investment...

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Bibliographic Details
Published in:NBER Working Paper Series 2018-09, p.25019
Main Authors: Choi, James J, Robertson, Adriana Z
Format: Article
Language:English
Subjects:
Consumption
Cost control
Economic theory
Equity
Investments
Mutual funds
Portfolio management
Securities markets
Stock exchanges
Online Access:Get full text
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Summary:Working Paper No. 25019 We survey a representative sample of U.S. individuals about how well leading academic theories describe their financial beliefs and decisions. We find substantial support for many factors hypothesized to affect portfolio equity share, particularly background risk, investment horizon, rare disasters, transactional factors, and fixed costs of stock market participation. Individuals tend to believe that past mutual fund performance is a good signal of stock-picking skill, actively managed funds do not suffer from diseconomies of scale, value stocks are safer and do not have higher expected returns, and high-momentum stocks are riskier and do have higher expected returns.
ISSN:0898-2937
DOI:10.3386/w25019