Journal Article

Are All Professional Investors Sophisticated?


  • Ulrich Schmidt
  • M. Schmeling
  • Lukas Menkhoff
Publication Date

Existing empirical evidence is inconclusive on whether professional investors show sophisticated behavior or not, a question which is at the heart of market efficiency. This ambiguous evidence is mostly based on trading data, which necessarily has limited coverage. Overcoming this narrow evidence, we conduct a survey of 500 investors, including several measures of sophistication, three relevant groups of investors and essential control variables. We find that both professional investors and laymen do indeed show unsophisticated investment behavior on aggregate. Furthermore, while some professional investors – institutional investors – behave at least more sophisticated than laymen, other professionals – investment advisors – seem to do even worse.

Kiel Institute Experts


JEL Classification
D80, F30, G1

Key Words

  • individual investors
  • Institutional investors
  • investment advisors
  • investment behavior