Do Wealthy Investors Have an Informational Advantage? Evidence Based on Account Classifications of Individual Investors
45 Pages Posted: 20 May 2015 Last revised: 18 Dec 2017
Date Written: October 1, 2016
While trading appears to be hazardous to most individual investors’ wealth, some individual investors with well-functioning informational networks may be able to turn a profit. Indeed, we find that in the Chinese stock market, wealthy investors with portfolio values above the 99.5th percentile (“super” investors) benefit from trading. Super investors who trade the most earn a risk-adjusted return well above that of other investors. Further investigation attributes at least part of their excess returns to informational advantages. These super investors profitably trade around companies’ announcements of high stock dividends, particularly those registered in these super investors’ localities, while the trades of other investors do not show such patterns.
Keywords: individual investors, trading behavior, trading performance
JEL Classification: G14
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