Abstract - Individual Investor Activity and Performance

[Translate to Englisch:] We examine the activity and performance of a large panel of individual investors (approximately 70,000 investors and their daily returns over the 2000 to 2010 period) in Sweden’s Premium Pension System. We document strong inertia in individuals’ choices and changes of mutual funds. We find that active investors outperform passive investors, and that there is a causal effect of fund changes on performance. The outperformance is primarily the result of dynamic fund selection. Activity is beneficial for the individual investor, whereas extreme flows out of mutual funds (which we attribute to financial advisors) affect funds’ net asset value negatively for all investors.

Magnus Dahlquist
Stockholm School of Economics
05.Jun 2012

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