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Are All Professional Investors Sophisticated?


Address for correspondence: Lukas Menkhoff, Department of Economics, Leibniz Universität Hannover, Königs-worther Platz 1, D-30167 Hannover, Germany. Tel.: +49 511 762 4551; fax: +49 511 762 4796; e-mail:


Abstract. Existing empirical evidence is inconclusive as to whether professional investors show more sophisticated behavior than individual investors. Therefore, we study two important groups of professional investors and compare them with laymen by means of a survey covering about 500 investors. We find that some professionals, i.e. institutional investors, behave in a more sophisticated manner than laymen, whereas the less researched investment advisors seem to do even worse. Our survey approach complements available evidence due to its design: it compares professionals with (qualified) interested laymen, it covers six measures of sophisticated behavior, uses several control variables and strictly compares investment decisions in the private domain.