Skip to main content

Can individual investors outperform?

Do some individual investors consistently outperform? That is the question asked by the CXO Advisory blog in a review of a recent paper that examines the investment performance of individual investors.

Here is an abstract of the August 2007 paper in question, entitled, "Performance Persistence of Individual Investors".

This paper investigates the stock market performance persistence of individual investors. The study is based on unique data that allows us to observe month-end stock market portfolios of all individual investors over an eleven year period.

We find that a substantial number of investors exhibit economically and statistically significant performance persistence. This is robust to how we measure past performance, how often investors trade and whether investors are small or large. Unlike the evidence from mutual and pension funds, the persistence in performance we uncover is not concentrated in investors with poor prior performance. We also show that forming a portfolio that is long in stocks previously favored by top performing investors earns a substantial risk adjusted return in the future.

You can download the paper in PDF format at the SSRN site link above, or check out the CXO Advisory blog's post for a brief rundown of their findings.

If you find their review interesting, you might also want to check out the CXO blog's other posts on this topic, which you'll find linked at the bottom of their post.

You can also check out the CXO Advisory blog for more interesting posts by clicking on the link in our sidebar blogroll.

Popular posts from this blog

Nasdaq credit rating junked.

S&P cut Nasdaq's credit rating to junk status citing debt burdens and its questionable strategy to buy a controlling interest in the London Stock Exchange. Financial Times reported that the exchange's counterparty credit & bank loan rating were lowered fromm BBB- (lowest investment grade rating) to BB+. The change will increase Nasdaq's borrowing costs should it wish to pursue aquisition targets. For an earlier look at the exchange consolidation trend that brought about Nasdaq's push for a stake in the LSE, please see "Exchange fever" .

Jesse Livermore: How to Trade in Stocks (1940 Ed. E-book)

If you've been around markets for any length of time, you've probably heard of 20th century supertrader, Jesse Livermore . Today we're highlighting his rare 1940 work, How to Trade in Stocks (ebook, pdf). But first, a brief overview of Livermore's life and trading career (bio from Jesse Livermore's Wikipedia entry). "During his lifetime, Livermore gained and lost several multi-million dollar fortunes. Most notably, he was worth $3 million and $100 million after the 1907 and 1929 market crashes, respectively. He subsequently lost both fortunes. Apart from his success as a securities speculator, Livermore left traders a working philosophy for trading securities that emphasizes increasing the size of one's position as it goes in the right direction and cutting losses quickly. Ironically, Livermore sometimes did not follow his rules strictly. He claimed that lack of adherence to his own rules was the main reason for his losses after making his 1907 and...

Finance Trends 2019 Mid-Year Markets Review

Email subscribers of the Finance Trends Newsletter receive the first look at new articles and market updates, such as the following piece, sent out to our email list on Sunday (6/14).   Hello and welcome, everyone! If you received our last email notice over the July 4th holiday, you'll know that this weekend's newsletter will serve as a mid-year market update and a follow-up to issue #29, " How to Reinvest in a Rising Market ".   Ladies and gentlemen, without further ado, let's start the show...  Finance Trends Newsletter: Our Mid-Year Market Review When we last spoke, back in February, the U.S. stock market was rallying off its December-January lows. As the S&P 500 and Nasdaq reclaimed their 200 day moving averages in February and March, it became increasingly apparent that a lot of retail investors (and perhaps some institutional investors) were left under-invested while watching this recovery move from the sidelines.  The U.S. stock ...