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Are All Professional Investors Sophisticated?

Author

Listed:
  • Menkhoff Lukas

    (Leibniz Universität Hannover,Hannover, Germany)

  • Schmeling Maik

    (Leibniz Universität Hannover,Hannover, Germany)

  • Schmidt Ulrich

    (University of Kiel, Christian-Albrechts-Platz 4,Kiel, Germany)

Abstract

Existing empirical evidence is inconclusive as to whether professional investors show more sophisticated behavior than individual investors. Therefore, we study two important groups of professional investors and compare them with laymen by means of a survey covering about 500 investors.We find that some professionals, i.e. institutional investors, behave in a more sophisticated manner than laymen, whereas the less researched investment advisors seem to do even worse. Our survey approach complements available evidence due to its design: it compares professionals with (qualified) interested laymen, it covers six measures of sophisticated behavior, uses several control variables and strictly compares investment decisions in the private domain.

Suggested Citation

  • Menkhoff Lukas & Schmeling Maik & Schmidt Ulrich, 2010. "Are All Professional Investors Sophisticated?," German Economic Review, De Gruyter, vol. 11(4), pages 418-440, December.
    • Handle: RePEc:bpj:germec:v:11:y:2010:i:4:p:418-440
    DOI: 10.1111/j.1468-0475.2009.00497.x
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    Cited by:

    1. Walter Krämer & Michael Bücker, 2011. "Probleme des Qualitätsvergleichs von Kreditausfallprognosen," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer;Deutsche Statistische Gesellschaft - German Statistical Society, vol. 5(1), pages 39-58, March.
    2. D. Schneller & S. Heiden & M. Heiden & A. Hamid, 2018. "Home is Where You Know Your Volatility – Local Investor Sentiment and Stock Market Volatility," German Economic Review, Verein für Socialpolitik, vol. 19(2), pages 209-236, May.
    3. Tian, Geran & Wang, Xiaowen & Wu, Weixing, 2021. "Borrow low, lend high: Credit arbitrage by sophisticated investors," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    4. Roshani Chamalka Gunathilaka & J. M. Ruwani Fernando, 2021. "Do behavioral biases differ among institutional and individual investors?," Oblik i finansi, Institute of Accounting and Finance, issue 2, pages 61-73, June.
    5. Rafał Wolski & Monika Bolek & Jerzy Gajdka & Janusz Brzeszczyński & Ali M. Kutan, 2023. "Do investment fund managers behave rationally in the light of central bank communication? Survey evidence from Poland," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 15(5), pages 757-794, February.

    More about this item

    Keywords

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    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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