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Learning By TradingAmit SeruUniversity of Chicago - Booth School of Business and NBER Tyler ShumwayUniversity of Michigan at Ann Arbor Noah StoffmanIndiana University Bloomington - Department of Finance February 15, 2009 Abstract: Using a large sample of individual investor records over a nine-year period, we analyze survival rates, the disposition effect and trading performance at the individual level to determine whether and how investors learn from their trading experience. We find evidence of two types of learning: some investors become better at trading with experience, while others stop trading after realizing that their ability is poor. A substantial part of overall learning by trading is explained by the second type. By ignoring investor attrition, the existing literature significantly overestimates how quickly investors become better at trading.
Number of Pages in PDF File: 49 Keywords: Learning, Behavioral Biases, Disposition Effect, Individual Investor Performance JEL Classification: D10, G10 working papers seriesDate posted: March 20, 2006 ; Last revised: February 18, 2009Suggested CitationContact Information
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