Learning Fast or Slow?
43 Pages Posted: 9 Dec 2014 Last revised: 9 Jan 2019
Date Written: December 27, 2018
Rational models claim “trading to learn” can explain widespread excessive speculative trading and challenge behavioral explanations of excessive trading (e.g., overconfidence and entertainment). We argue rational learning models cannot explain much of speculative trading by studying day traders in Taiwan from 1992-2006. 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, the vast majority of day traders are unprofitable, and a great many day traders persist in trading despite persistent losses.
Keywords: learning, day traders, day trading, individual investors, Taiwan
JEL Classification: G01, G11
Suggested Citation: Suggested Citation