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Retail investor experience, asset learning, and portfolio risk-adjusted returns

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  • Fjesme, Sturla Lyngnes

Abstract

It is well documented in the finance literature that retail investors (households) underperform on a risk-adjusted basis when trading in securities markets. More recently, however, there is growing evidence that some retail investors increase risk-adjusted returns from security selection (portfolio concentration). I show that these mixed findings are driven by investor trading experience. Using unique portfolio holdings data of all the 620,970 domestic retail investors on the Oslo Stock Exchange (OSE) from 1993 to 2006, I document that inexperienced investors reduce returns from portfolio concentration. However, as investors gain trading experience their ability to turn portfolio concentration into excess returns improves.

Suggested Citation

  • Fjesme, Sturla Lyngnes, 2020. "Retail investor experience, asset learning, and portfolio risk-adjusted returns," Finance Research Letters, Elsevier, vol. 36(C).
    • Handle: RePEc:eee:finlet:v:36:y:2020:i:c:s1544612318305476
    DOI: 10.1016/j.frl.2019.101315
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    References listed on IDEAS

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    More about this item

    Keywords

    Retail investors; Portfolio choice; Portfolio performance;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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