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Individual investors’ sophistication and expectations of risk and return
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Business Administration.
2019 (English)In: Review of Behavioral Finance, ISSN 1940-5979, Vol. 11, no 1, p. 2-22Article in journal (Refereed) Published
Abstract [en]

Purpose – The purpose of this paper is to investigate the relationship between individual investors’ level of sophistication and their expectations of risk and return in the stock market.

Design/methodology/approach – The author combines survey and registry data on individual investors in Sweden to obtain 11 sophistication proxies that previous research has related to individuals’ financial decisions. These proxies are related to a survey measure regarding individual investors’ expectations of risk and return in an index fund using linear regressions.

Findings – The findings in this paper indicate that sophisticated investors have lower risk and higher return expectations that are closer to objective measures than those of less-sophisticated investors.

Originality/value – These results are important, since they enhance the understanding of the underlying mechanisms through which sophistication can influence financial decisions.

Place, publisher, year, edition, pages
Emerald Group Publishing Limited, 2019. Vol. 11, no 1, p. 2-22
National Category
Business Administration Economics and Business
Identifiers
URN: urn:nbn:se:umu:diva-160879DOI: 10.1108/RBF-08-2017-0087ISI: 000471171700001OAI: oai:DiVA.org:umu-160879DiVA, id: diva2:1330326
Available from: 2019-06-25 Created: 2019-06-25 Last updated: 2019-07-09Bibliographically approved

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Stålnacke, Oscar

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