Down or out: Assessing the welfare costs of household investment mistakes

• 成果类型: Article
• 署名作者: Calvet, Laurent E.; Campbell, John Y.; Sodini, Paolo
• 署名单位: Imperial College London; National Bureau of Economic Research; Harvard University; Stockholm School of Economics; Sveriges Riksbank
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/524204
• 发表日期: 2007
• 页码: 707-747
• 关键词: individual investors; market participation; portfolio choice; performance; diversification; allocation; WEALTH

摘要

This paper investigates the efficiency of household investment decisions using comprehensive disaggregated Swedish data. We consider two main sources of inefficiency: underdiversification (down) and nonparticipation in risky asset markets (out). While a few households are very poorly diversified, most Swedish households outperform the Sharpe ratio of their domestic stock index through international diversification. Financially sophisticated households invest more efficiently but also more aggressively, and overall they incur higher return losses from underdiversification. The return cost of nonparticipation is smaller by almost one-half when we take account of the fact that nonparticipants would likely be inefficient investors.