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Misperceived Returns to Active Investing

Author

Listed:
  • Ingar Haaland
  • Ole-Andreas Elvik Næss
  • Ingar K. Haaland

Abstract

We conduct field experiments with retail investors recruited from a social trading platform. In our main experiment, we first elicit beliefs about the returns to active investing. We then generate exogenous variation in beliefs by providing treated respondents with information about index funds historically outperforming active funds. Treated respondents are 17.8 percentage points more likely to believe that index funds will outperform active funds in the future. Four months after the experiment, we collect administrative data on portfolio allocations. Treated respondents increase the index fund shares of their portfolios by 4.4 percentage points (37.7%) relative to the control group.

Suggested Citation

  • Ingar Haaland & Ole-Andreas Elvik Næss & Ingar K. Haaland, 2023. "Misperceived Returns to Active Investing," CESifo Working Paper Series 10257, CESifo.
    • Handle: RePEc:ces:ceswps:_10257
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    More about this item

    Keywords

    household finance; retail investors; portfolio allocations; field experiment;
    All these keywords.

    JEL classification:

    • G50 - Financial Economics - - Household Finance - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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