Learning Fast or Slow?

Forthcoming: Review of Asset Pricing Studies

58 Pages Posted: 9 Dec 2014 Last revised: 12 Jul 2019

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

Peking University - Guanghua School of Management

Terrance Odean

University of California, Berkeley - Haas School of Business

Ke Zhang

Nanjing University - School of Management and Engineering

Date Written: May 28, 2019

Abstract

Rational models claim “trading to learn” explains widespread excessive speculative trading and challenge behavioral explanations of excessive trading. We argue rational learning models do not explain speculative trading by studying day traders in Taiwan. Consistent with previous studies of learning, unprofitable day traders are more likely to quit than profitable traders. Consistent with models of overconfidence and biased learning (but not with rational learning), the aggregate performance of day traders is negative, 74% of day trading volume is generated by traders with a history of losses, and 97% of day traders are likely to lose money in future day trading.

Keywords: learning, day traders, day trading, individual investors, Taiwan

JEL Classification: G01, G11

Suggested Citation

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies. Available at SSRN: https://ssrn.com/abstract=2535636 or http://dx.doi.org/10.2139/ssrn.2535636

Brad M. Barber

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

Peking University - Guanghua School of Management ( email )

Beijing
China

Terrance Odean (Contact Author)

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

Ke Zhang

Nanjing University - School of Management and Engineering ( email )

Nanjing, 210093
China

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