Diversified Investing

In general, absent any inside information, an equity investor can expect to do better by holding a well-diversified, low-fee, passive index fund than by holding a few stocks.

Responses weighted by each expert's confidence

Participant University Vote Confidence Bio/Vote History
Aghion
Philippe Aghion
Harvard Did Not Answer Bio/Vote History
Allen
Franklin Allen
Imperial College London
Agree
8
Bio/Vote History
In the absence of inside information, on average a diversified strategy should do better unless the person has good judgment.
Antras
Pol Antras
Harvard
Strongly Agree
9
Bio/Vote History
Unless the investor is a risk lover
Baldwin
Richard Baldwin
The Graduate Institute Geneva Did Not Answer Bio/Vote History
Besley
Timothy J. Besley
LSE Did Not Answer Bio/Vote History
Blanchard
Olivier Blanchard
Peterson Institute
Strongly Agree
9
Bio/Vote History
This is a no brainer. The only qualification is that the diversified portfolio may not be exactly the market portfolio.
Bloom
Nicholas Bloom
Stanford
Agree
8
Bio/Vote History
This is the prediction of our basic "no free lunch principle". All my savings are in index tracker, so i am living this view!
Blundell
Richard William Blundell
University College London Did Not Answer Bio/Vote History
Bénassy-Quéré
Agnès Bénassy-Quéré
Paris School of Economics
Strongly Agree
9
Bio/Vote History
Carletti
Elena Carletti
Bocconi
Agree
8
Bio/Vote History
Danthine
Jean-Pierre Danthine
Paris School of Economics
Strongly Agree
10
Bio/Vote History
De Grauwe
Paul De Grauwe
LSE
Agree
8
Bio/Vote History
Eeckhout
Jan Eeckhout
UPF Barcelona
Strongly Agree
10
Bio/Vote History
Fehr
Ernst Fehr
Universität Zurich Did Not Answer Bio/Vote History
Freixas
Xavier Freixas
Barcelona GSE Did Not Answer Bio/Vote History
Fuchs-Schündeln
Nicola Fuchs-Schündeln
Goethe-Universität Frankfurt
Strongly Agree
8
Bio/Vote History
Galí
Jordi Galí
Barcelona GSE
Agree
8
Bio/Vote History
I agree with the statement as "doing better" is interpreted to mean enjoying a higher average return for any given level of risk.
Garicano
Luis Garicano
LSE
Strongly Agree
10
Bio/Vote History
Giavazzi
Francesco Giavazzi
Bocconi Did Not Answer Bio/Vote History
Griffith
Rachel Griffith
University of Manchester
Agree
8
Bio/Vote History
Guerrieri
Veronica Guerrieri
Chicago Booth
Strongly Agree
8
Bio/Vote History
Guiso
Luigi Guiso
Einaudi Institute for Economics and Finance
Strongly Agree
8
Bio/Vote History
for a typical investor I strongly believe a passive, cheap index is better than a passive portfolio of a few stocks
Hellwig
Martin Hellwig
Max Planck Institute for Research on Collective Goods
Agree
10
Bio/Vote History
The empirical evidence is overwhelming.
Honohan
Patrick Honohan
Trinity College Dublin
Strongly Agree
10
Bio/Vote History
"Do better"understood to capture risk as well as expected return, of course.
Kleven
Henrik Kleven
Princeton
Strongly Agree
7
Bio/Vote History
Krahnen
Jan Pieter Krahnen
Goethe University Frankfurt
Strongly Agree
8
Bio/Vote History
A quant hedge fund may extract extra return by big data strategies, but an average guy, like myself, will likely fail with stock-picking.
Krusell
Per Krusell
Stockholm University
Strongly Agree
9
Bio/Vote History
I don't know of any convincing systematic evidence to the contrary.
Kőszegi
Botond Kőszegi
Central European University
Strongly Agree
9
Bio/Vote History
La Ferrara
Eliana La Ferrara
Harvard Kennedy Did Not Answer Bio/Vote History
Leuz
Christian Leuz
Chicago Booth
Strongly Agree
9
Bio/Vote History
Lots of evidence. Few people consistently earn risk-adj. ret > index ret. And even then, much might be compensation for time & effort.
-see background information here
Meghir
Costas Meghir
Yale
Strongly Agree
10
Bio/Vote History
Neary
Peter Neary
Oxford
Strongly Agree
8
Bio/Vote History
A small industry exists to help naive investors beat the market. It should be subject to mandatory health warnings.
O'Rourke
Kevin O'Rourke
Oxford
Agree
7
Bio/Vote History
Pagano
Marco Pagano
Università di Napoli Federico II
Strongly Agree
10
Bio/Vote History
A no-brainer.
Pastor
Lubos Pastor
Chicago Booth
Strongly Agree
10
Bio/Vote History
I interpret "do better" in terms of a better risk-return tradeoff. Why take unnecessary idiosyncratic risk.
Persson
Torsten Persson
Stockholm University
Agree
6
Bio/Vote History
Pissarides
Christopher Pissarides
London School of Economics and Political Science
Strongly Agree
10
Bio/Vote History
Even if you get it right some of the time eventually you will get it wrong
Portes
Richard Portes
London Business School
Agree
6
Bio/Vote History
Prendergast
Canice Prendergast
Chicago Booth
Strongly Agree
9
Bio/Vote History
Reichlin
Lucrezia Reichlin
London Business School
Agree
6
Bio/Vote History
Repullo
Rafael Repullo
CEMFI
Strongly Agree
10
Bio/Vote History
Rey
Hélène Rey
London Business School Did Not Answer Bio/Vote History
Schoar
Antoinette Schoar
MIT
Strongly Agree
9
Bio/Vote History
Van Reenen
John Van Reenen
LSE
Strongly Agree
7
Bio/Vote History
Vickers
John Vickers
Oxford
Agree
6
Bio/Vote History
Assuming a degree of risk aversion. However some investors might rationally want some exposure to assets not available passively.
Voth
Hans-Joachim Voth
University of Zurich
Strongly Agree
9
Bio/Vote History
Just look at the long-term Warren Buffett bet against managed funds -- whenever there is outperformance, fees eat them up
-see background information here
Weder di Mauro
Beatrice Weder di Mauro
The Graduate Institute, Geneva
Agree
5
Bio/Vote History
Whelan
Karl Whelan
University College Dublin
Strongly Agree
10
Bio/Vote History
Wyplosz
Charles Wyplosz
The Graduate Institute Geneva
Strongly Agree
9
Bio/Vote History
Zilibotti
Fabrizio Zilibotti
Yale University
Agree
9
Bio/Vote History