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Are all professional investors sophisticated?

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Author Info
Menkhoff, Lukas
Schmeling, Maik
Schmidt, Ulrich

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Abstract

Existing empirical evidence is inconclusive on whether professional investors show sophisticated behavior or not, a question which is at the heart of market efficiency. This ambiguous evidence is mostly based on trading data or laboratory evidence, which each has its limitations. We complement these approaches by conducting a survey of 500 investors, including several measures of sophistication, three relevant groups of investors and essential control variables. We find that both professional investors and laymen do indeed show unsophisticated investment behavior on aggregate. Furthermore, while some professional investors - institutional investors - behave at least more sophisticated than laymen, other professionals - investment advisors - seem to do even worse.

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Publisher Info
Paper provided by Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover with number dp-397.

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Length: 33 pages
Date of creation: Apr 2008
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Handle: RePEc:han:dpaper:dp-397

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Related research
Keywords: Institutional investors; investment advisors; individual investors; investment behavior;

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Find related papers by JEL classification:
G1 - Financial Economics - - General Financial Markets
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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