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Mislearning and (poor) performance of individual investors

Author

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  • Villatoro, Félix
  • Fuentes, Olga
  • Riutort, Julio
  • Searle, Pamela

Abstract

We study individuals' incentives to make investment decisions. Using data from a large pension system in Chile we find that individuals who are active in managing their investments have, on average, poor performance. We provide robust evidence suggesting that learning plays an important part in this phenomenon. Indeed, individuals who have made successful investment decisions in the past go on to trade more frequently. However, this result holds when using a naive definition for successful decisions. Also, average performance is negatively related to the number of investment decisions, casting doubt on the existence of market timing skills.

Suggested Citation

  • Villatoro, Félix & Fuentes, Olga & Riutort, Julio & Searle, Pamela, 2024. "Mislearning and (poor) performance of individual investors," Journal of Pension Economics and Finance, Cambridge University Press, vol. 23(1), pages 30-52, January.
    • Handle: RePEc:cup:jpenef:v:23:y:2024:i:1:p:30-52_2
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