Who Trades?
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Abstract
Few retail investors actively buy and sell individual stocks. This paper finds that a sample of those who do - over 1,000 customers at a German broker who turn over their portfolio at a median annual rate of 85% - consists of predominantly male, younger, and more educated investors who earn higher incomes and almost unanimously profess to know more than the typical investor. Personal attributes including measures of self-reported investor sophistication, however, fail to explain much variation in sophistication (or lack thereof) inferred from actual investment decisions such as the tendency to tilt one's portfolio toward local and domestic stocks, take idiosyncratic risk, and churn one's portfolio. The one exception is self-reported risk tolerance, which is strongly positively correlated with portfolio risk and turnover, swamping previously documented gender and age effects.