In general, absent any inside information, an equity investor can expect to do better by choosing a well-diversified, low-cost index fund than by picking a few stocks.
Responses
© 2025. Kent A. Clark Center for Global Markets.
7%
0%
0%
2%
2%
30%
59%
Responses weighted by each expert's confidence
© 2025. Kent A. Clark Center for Global Markets.
0%
2%
3%
26%
69%
Participant |
University |
Vote |
Confidence |
Bio/Vote History |
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 Daron Acemoglu |
MIT | Bio/Vote History | ||
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 Alberto Alesina |
Harvard | Did Not Answer | Bio/Vote History | |
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 Joseph Altonji |
Yale | Bio/Vote History | ||
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 Alan Auerbach |
Berkeley | Bio/Vote History | ||
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 David Autor |
MIT | Bio/Vote History | ||
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 Katherine Baicker |
University of Chicago | Bio/Vote History | ||
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 Abhijit Banerjee |
MIT | Bio/Vote History | ||
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 Marianne Bertrand |
Chicago | Bio/Vote History | ||
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 Markus Brunnermeier |
Princeton | Bio/Vote History | ||
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 Raj Chetty |
Harvard | Bio/Vote History | ||
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 Judith Chevalier |
Yale | Bio/Vote History | ||
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Stock picker bears a lot of idiosyncratic risk
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 Janet Currie |
Princeton | Bio/Vote History | ||
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 David Cutler |
Harvard | Bio/Vote History | ||
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 Angus Deaton |
Princeton | Bio/Vote History | ||
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"Better" is delightfully vague.
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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Sounds like a trick question! This one is obvious: diversification is a big benefit, even putting aside fee savings.
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 Aaron Edlin |
Berkeley | Bio/Vote History | ||
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The typical investor is certainly best off buying a low-cost indexed fund. That said, money may be makable without inside information.
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 Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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 Liran Einav |
Stanford | Bio/Vote History | ||
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 Ray Fair |
Yale | Bio/Vote History | ||
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 Amy Finkelstein |
MIT | Bio/Vote History | ||
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 Pinelopi Goldberg |
Yale | Bio/Vote History | ||
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 Austan Goolsbee |
Chicago | Bio/Vote History | ||
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(DUH)
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 Michael Greenstone |
University of Chicago | Bio/Vote History | ||
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 Robert Hall |
Stanford | Did Not Answer | Bio/Vote History | |
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 Oliver Hart |
Harvard | Bio/Vote History | ||
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In equilibrium the typical investor cannot beat the market. Thus a well-diversified buy and hold strategy is best for such an investor
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 Bengt Holmström |
MIT | Bio/Vote History | ||
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 Caroline Hoxby |
Stanford | Bio/Vote History | ||
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There is ample empirical evidence for this claim.
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 Hilary Hoynes |
Berkeley | Bio/Vote History | ||
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 Kenneth Judd |
Stanford | Bio/Vote History | ||
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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Almost everyone should be investing in this way and ignoring tips from friends and experts on particular stocks.
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 Pete Klenow |
Stanford | Bio/Vote History | ||
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Keepi the expense ratio down!
-see background information here |
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 Jonathan Levin |
Stanford | Bio/Vote History | ||
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Key words here are "in general" - most people are unlikely to replicate Warren Buffett's performance.
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 Eric Maskin |
Harvard | Bio/Vote History | ||
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 William Nordhaus |
Yale | Bio/Vote History | ||
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 Maurice Obstfeld |
Berkeley | Bio/Vote History | ||
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Literally, "expected" return may be higher than for diversfied basket, despite higher variance. Does "do better" include pain of variance?
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 Emmanuel Saez |
Berkeley | Bio/Vote History | ||
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 Larry Samuelson |
Yale | Bio/Vote History | ||
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Picking a few stocks makes sense only if one has better information than the market, which is unlikely without inside information.
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 José Scheinkman |
Columbia University | Bio/Vote History | ||
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 Richard Schmalensee |
MIT | Bio/Vote History | ||
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Not a great question: "a few stocks" might hit it big, "do better than" and "in general" are not well-defined.
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 Carl Shapiro |
Berkeley | Bio/Vote History | ||
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Diversification rocks. Perhaps there are some exceptions for some investors, e.g., based on a tax angle.
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 Robert Shimer |
University of Chicago | Bio/Vote History | ||
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Aggregate stock returns have some forecastibility, but this is a question about individual stocks
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 Hyun Song Shin |
Princeton | Did Not Answer | Bio/Vote History | |
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 Nancy Stokey |
University of Chicago | Bio/Vote History | ||
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You could do the diversification and periodic rebalancing yourself, and perhaps save a few dollars in transaction costs, but why bother?
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 Richard Thaler |
Chicago Booth | Bio/Vote History | ||
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The annual test to see whether panelists are awake.
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 Christopher Udry |
Northwestern | Bio/Vote History | ||
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Unless, of course, you *like* the thrill of gambling.
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