IDEAS home Printed from https://ideas.repec.org/a/cup/jfinqa/v48y2013i01p1-45_00.html
   My bibliography  Save this article

Do Portfolio Distortions Reflect Superior Information or Psychological Biases?

Author

Listed:
  • Korniotis, George M.
  • Kumar, Alok

Abstract

Using a demographics-based proxy for smartness, we show that the portfolio distortions of “smart” investors reflect an informational advantage, while the distortions of “dumb” investors reflect psychological biases. Specifically, smart investors outperform dumb investors by about 3% annually on a risk-adjusted basis. Furthermore, among investors with high portfolio distortions, smart investors outperform passive benchmarks by 2%, and the smart-dumb performance differential is 5%. At the stock level, a portfolio of stocks with smart investor clientele outperforms the dumb clientele portfolio by 3.50% annually. These findings suggest that behavioral and information-based explanations for portfolio distortions apply to distinct subsets of investors.

Suggested Citation

  • Korniotis, George M. & Kumar, Alok, 2013. "Do Portfolio Distortions Reflect Superior Information or Psychological Biases?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 48(1), pages 1-45, February.
    • Handle: RePEc:cup:jfinqa:v:48:y:2013:i:01:p:1-45_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0022109012000610/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:48:y:2013:i:01:p:1-45_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/jfq .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.