Rationalizing Trading Frequency and Returns

19 Pages Posted: 4 Jun 2010

See all articles by Yosef Bonaparte

Yosef Bonaparte

University of Colorado at Denver - Department of Finance

Russell Cooper

University of Texas at Austin - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: May 2010

Abstract

Barber and Odean (2000) study the relationship between trading frequency andreturns. They find that households who trade more frequently have a lower net return than other households. But all households have about the same gross return. They argue that these results cannot emerge from a model with rational traders and instead attribute these findings to overconfidence. Using a dynamic optimization approach, we find that neither a model with rational agents facing adjustment costs nor various models of overconfidence fit these facts.

Suggested Citation

Bonaparte, Yosef and Cooper, Russell W., Rationalizing Trading Frequency and Returns (May 2010). NBER Working Paper No. w16022. Available at SSRN: https://ssrn.com/abstract=1612615

Yosef Bonaparte (Contact Author)

University of Colorado at Denver - Department of Finance ( email )

United States

Russell W. Cooper

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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