Learning by Trading
Posted: 1 Feb 2010
There are 2 versions of this paper
Learning By Trading
Date Written: September 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: D10, G10
Suggested Citation: Suggested Citation
Tyler Shumway
University of Michigan at Ann Arbor, The Stephen M. Ross School of Business ( email )
701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-763-4129 (Phone)
734-936-0274 (Fax)
HOME PAGE: http://www.umich.edu/~shumway
Noah Stoffman
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States
(812) 856-5664 (Phone)
HOME PAGE: http://www.stoffprof.com/