Investment in Financial Information and Portfolio Performance

Luigi Guiso and Tullio Jappelli ()

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: Rational investors perceive correctly the value of financial information. Investment in information is therefore associated with a higher expected portfolio return and Sharpe ratio. Overconfident investo rs overstate the quality of their own information, and thus investment in information is associated with a lower expected Sharpe ratio despite they realize higher average returns. We contrast the implications of these two models using two unique surveys of customers of a leading Italian bank with portfolio data and measures of financial information. We find that the investment in information is positively associated with returns to financial wealth and negatively to Sharpe ratio. The latter falls with proxies for overconfidence. We relate these findings to the wealth inequality debate.

Keywords: Portfolio Choice; Information; Overconfidence (search for similar items in EconPapers)
JEL-codes: D8 E2 G1 (search for similar items in EconPapers)
Date: 2018-06-14
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-mac and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Forthcoming in Economica

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http://www.csef.it/WP/wp501.pdf (application/pdf)

Related works:
Journal Article: Investment in Financial Information and Portfolio Performance (2020)
Working Paper: Investment in Financial Information and Portfolio Performance (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:501

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