Stockholdings of first-time and more experienced investors
Abstract
Purpose
The purpose of this paper is to examine whether socio-economic factors influence portfolio composition of individual investors investing in stocks for the first time and how these factors relate to stock portfolio performance.
Design/methodology/approach
The study uses cross-sectional time-series analysis to examine a unique and detailed data set of Swedish stockholdings.
Findings
The results show that first-time investors do not hold diversified portfolios. They experience high market risk and, on average, underperform more experienced investors. Males have higher unsystematic risk in their portfolios than females and older investors have more diversified portfolios compared to younger investors.
Research limitations/implications
The results show that individual investors should improve their insights by incorporating risk when investing in stocks.
Practical implications
Given the results of this paper, the movement from defined benefit to defined contribution pension schemes in many countries raises the issue of the need to better understand and monitor the risks in stock portfolios.
Originality/value
This study provides insights into whether socio-economic factors influence portfolio composition, the extent to which socio-economic factors and portfolio characteristics relate to portfolio returns, and whether portfolio performance between first-time and more experienced investors differs.
Keywords
Acknowledgements
The authors thank the participants at the Midwest Finance Association Conference and Southern Finance Association Conference both in 2016 for their helpful comments and suggestions. The authors also appreciate the constructive feedback from Jay Ritter, Ki Han, and Tao Shu, computer support from Daniel Hallgren, and Krister Modin at Euroclear Sweden for providing the authors with data.
Citation
Baker, K., De Ridder, A. and De Vries, A. (2018), "Stockholdings of first-time and more experienced investors", Review of Behavioral Finance, Vol. 10 No. 2, pp. 146-162. https://doi.org/10.1108/RBF-11-2016-0077
Publisher
:Emerald Publishing Limited
Copyright © 2018, Emerald Publishing Limited