Learning Fast or Slow?
Forthcoming: Review of Asset Pricing Studies
58 Pages Posted: 9 Dec 2014 Last revised: 12 Jul 2019
Date Written: May 28, 2019
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: Suggested Citation