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Learning By Trading
Amit Seru University of Chicago - Booth School of Business Tyler Shumway University of Michigan at Ann Arbor Noah Stoffman Indiana 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.
Keywords: Learning, Behavioral Biases, Disposition Effect, Individual Investor Performance JEL Classifications: D10, G10 Working Paper SeriesDate posted: March 20, 2006 ; Last revised: February 18, 2009Suggested CitationContact Information
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