The Correlated Trading and Investment Performance of Individual Investors

50 Pages Posted: 30 Aug 2014 Last revised: 5 Sep 2018

See all articles by Weiyu Kuo

Weiyu Kuo

National Chengchi University (NCCU) - Department of International Business

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics

Jing Zhao

Hong Kong Polytechnic University - School of Accounting and Finance

Date Written: September 1, 2018

Abstract

We find that individual investors tend to trade in the same direction as other individual investors in the same broker branch. The more pronounced an individual investor’s herding behavior, the worse she performs in her investments. One explanation that herding investors underperform is the poor market timing of their trades. We find that limit orders from those who herd more have a longer time-to-execution and time-to-cancellation, indicating that these orders face a fierce competition to execute and tend to become stale after submissions. Finally, we find that individual investors learn from their past experience and herd less in the future.

Keywords: herding, trading correlation, investment performance, individual investors, learning

JEL Classification: G02, G15

Suggested Citation

Kuo, Weiyu and Lin, Tse-Chun and Zhao, Jing, The Correlated Trading and Investment Performance of Individual Investors (September 1, 2018). Available at SSRN: https://ssrn.com/abstract=2488845 or http://dx.doi.org/10.2139/ssrn.2488845

Weiyu Kuo

National Chengchi University (NCCU) - Department of International Business ( email )

Taipei City
Taiwan

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Jing Zhao (Contact Author)

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Hung Hom
Kowloon
Hong Kong

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