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Mislearning and (poor) performance of individual investors

Published online by Cambridge University Press:  11 August 2022

Félix Villatoro Open the ORCID record for Félix Villatoro [Opens in a new window] ,
Olga Fuentes ,
Julio Riutort  and
Pamela Searle
Félix Villatoro*
Affiliation:
Business School, Universidad Adolfo Ibáñez, Penalolen, Chile NETSPAR, Tilburg, Netherlands
Olga Fuentes
Affiliation:
Superintendencia de Pensiones, Santiago, Chile
Julio Riutort
Affiliation:
Business School, Universidad Adolfo Ibáñez, Penalolen, Chile
Pamela Searle
Affiliation:
University of Leeds, Leeds, UK
*
*Corresponding author. Email: felix.villatoro@uai.cl
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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.

Keywords

Household financeinvestment performancelearningpension savings

JEL classification

C15: Statistical Simulation Methods: General D14: Household Saving • Personal Finance G11: Portfolio Choice • Investment Decisions
Type
Article
Information
Journal of Pension Economics & Finance , Volume 23 , Issue 1 , January 2024 , pp. 30 - 52
Copyright
Copyright © The Author(s), 2022. Published by Cambridge University Press

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