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
Maxime Merli: Université catholique de Louvain, LIDAM/LFIN, Belgium

No 2021015, LIDAM Reprints LFIN from Université catholique de Louvain, Louvain Finance (LFIN)

Abstract: Using self-reported retail investor information from a risk-return profile survey, we investigate the determinants of individual return objectives as well as the capacity of investors to achieve 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 sociodemographic variables (age and education), and recent past trading intensity. Retail investors with higher return objectives perform better than their counterparts who want to avoid any risk of capital loss. The capacity to achieve the return objective, however, decreases as the level of the objective 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: 24
Date: 2021-06-05
Note: In: Journal of Economic Behavior & Organization, 2021, vol. 188, p. 879-902
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Citations: View citations in EconPapers (5)

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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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Persistent link: https://EconPapers.repec.org/RePEc:ajf:louvlr:2021015

DOI: 10.1016/j.jebo.2021.06.009

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