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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 Series

Date posted: March 20, 2006 ; Last revised: February 18, 2009

Suggested Citation

Seru, Amit, Shumway, Tyler and Stoffman, Noah, Learning By Trading (February 15, 2009). Available at SSRN: http://ssrn.com/abstract=891694


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Contact Information

Tyler Shumway (Contact Author)
University of Michigan at Ann Arbor ( email )
Ross School of Business
701 Tappan Street
Ann Arbor, MI 48109
United States
734-763-4129 (Phone)
734-936-0274 (Fax)
HOME PAGE: http://www.umich.edu/~shumway
Amit Seru
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
Noah Stoffman
Indiana University Bloomington - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States
(812) 856-5664 (Phone)
HOME PAGE: http://kelley.iu.edu/nstoffma/
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