Just How Much Do Individual Investors Lose by Trading?

Posted: 25 Jan 2009

See all articles by Brad M. Barber

Brad M. Barber

University of California, Davis

Yi-Tsung Lee

Peking University - Guanghua School of Management

Yu-Jane Liu

National Chengchi University (NCCU) - Department of Finance and Banking

Terrance Odean

University of California, Berkeley - Haas School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: February 2009

Abstract

Individual investor trading results in systematic and economically large losses. Using a complete trading history of all investors in Taiwan, we document that the aggregate portfolio of individuals suffers an annual performance penalty of 3.8 percentage points. Individual investor losses are equivalent to 2.2% of Taiwan's gross domestic product or 2.8% of the total personal income. Virtually all individual trading losses can be traced to their aggressive orders. In contrast, institutions enjoy an annual performance boost of 1.5 percentage points, and both the aggressive and passive trades of institutions are profitable. Foreign institutions garner nearly half of institutional profits.

Keywords: G11, G14, G15, H31

Suggested Citation

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance, Just How Much Do Individual Investors Lose by Trading? (February 2009). The Review of Financial Studies, Vol. 22, Issue 2, pp. 609-632, 2009. Available at SSRN: https://ssrn.com/abstract=1331871 or http://dx.doi.org/hhn046

Brad M. Barber (Contact Author)

University of California, Davis ( email )

Graduate School of Management
One Shields Avenue
Davis, CA 95616
United States
530-752-0512 (Phone)
530-752-2924 (Fax)

Yi-Tsung Lee

Peking University - Guanghua School of Management ( email )

Office 336, Guanghua Building 2
Beijing, Beijing 100871
China
(86-10) 6275 5742 (Phone)
(86-10) 6275 5742 (Fax)

Yu-Jane Liu

National Chengchi University (NCCU) - Department of Finance and Banking ( email )

64, Chih-nan Rd., Sec. 2, Mucha,
Taipei, 116
Taiwan ROC
(882)-2-2939-3091 ext. 81123 (Phone)

Terrance Odean

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
510-642-6767 (Phone)
510-666-2561 (Fax)

HOME PAGE: http://www.haas.berkeley.edu/faculty/odean.html

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