Down or Out: Assessing the Welfare Costs of Household Investment Mistakes.
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Down or Out: Assessing the Welfare Costs of Household Investment Mistakes.
| Title: | Down or Out: Assessing the Welfare Costs of Household Investment Mistakes. |
| Author: |
Sodini, Paolo; Campbell, John; Calvet, Laurent E.
Note: Order does not necessarily reflect citation order of authors. |
| Citation: | Calvet, Laurent E., John Y. Campbell, and Paolo Sodini. 2007. Down or out: assessing the welfare costs of household investment mistakes. Journal of Political Economy 115(5): 707-747. |
| Full Text & Related Files: |
campbell_down_out.pdf (9.864Mb; PDF) 
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| Abstract: | This paper investigates the efficiency of household investment decisions using comprehensive disaggregated Swedish data. We consider two main sources of inefficiency: underdiversification (“down”) and nonparticipation in risky asset markets (“out”). While a few households are very poorly diversified, most Swedish households outperform the Sharpe ratio of their domestic stock index through international diversification. Financially sophisticated households invest more efficiently but also more aggressively, and overall they incur higher return losses from underdiversification. The return cost of nonparticipation is smaller by almost one‐half when we take account of the fact that nonparticipants would likely be inefficient investors. |
| Published Version: | http://dx.doi.org/10.1086/524204 |
| Terms of Use: | This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA |
| Citable link to this page: | http://nrs.harvard.edu/urn-3:HUL.InstRepos:3122488 |
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Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University
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