Do retail investors bite off more than they can chew? A close look at their return objectives

D’Hondt, Catherine, Rudy De Winne and Maxime Merli
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D’Hondt, Catherine: Université catholique de Louvain, LIDAM/LFIN, Belgium

No 2021003, LIDAM Discussion Papers LFIN from Université catholique de Louvain, Louvain Finance (LFIN)

Abstract: Using information self-reported by retail investors in a risk-return profiling survey, we investigate the determinants of individual return objectives as well as the capacity of investors to reach them. Controlling for a large set of covariates, we provide empirical evidence that return objectives are related to subjective individual characteristics (such as financial literacy and risk tolerance), some sociodemographics (age, education), as well as recent past trading intensity. Retail investors with higher return objectives perform better, compared to their counterparts who want to avoid any risk of capital loss. The capacity to reach the return objective however decreases as the level of return objectives increases.

Keywords: Return objectives; Risk tolerance; Financial literacy; Retail investors; MiFID (search for similar items in EconPapers)
JEL-codes: G11 G40 (search for similar items in EconPapers)
Pages: 50
Date: 2021-03-08
New Economics Papers: this item is included in nep-cwa, nep-fle and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Do retail investors bite off more than they can chew? A close look at their return objectives (2021)
Working Paper: Do retail investors bite off more than they can chew? A close look at their return objectives (2021)
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