The contested significance of financial expertise in predicting short- and long-term risk and return on the stock market

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Published: Mar 9, 2020
DOI: https://doi.org/10.5750/jpm.v13i2.1762
Keywords:
financial expertise stock market predictions overconfidence forecast horizon

Main Article Content

Magnus Jansson
University of Gothenburg

Abstract

This study investigates whether the influence of financial expertise on stock investors’ ability to predict risk and return is contingent on the length of the forecast horizon. In a quasi-experimental design, stock market professionals (N1=63, N2=36), private shareholders (N1=155, N2=172) and students (N1=124, N2=90) twice provided their short- (3-month) and long-term (2-year) risk and return predictions on stock indices. The results show that in general, experts did not outperform students or private shareholders in their return predictions. However, the level of financial expertise positively influenced the accuracy of risk predictions. An interaction effect between financial expertise and the length of the forecast horizon suggests that more knowledgeable and experienced investors performed better in the long term compared to the short term than inexperienced investors did

Article Details

Issue
Vol. 13 No. 2 (2019)
Section
Articles
Author Biography

Magnus Jansson, University of Gothenburg

Ph-d and researcher at GRI, School of business, economics and law at the University of Gothenburg

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