Who Trades Profusely? The Characteristics of Frequent Trading Individual Investors

Abstract

Research has shown that investors trade too frequently and that this overtrading lowers investment return. This paper examines the characteristics of those investors that trade frequently. Using over three years of trading data of 7200 investors at a brokerage firm in the UK, descriptive statistics and multiple regression analyses were able to identify the predictive characteristics of investors that trade often. Most noteworthy is that trading frequency is positively skewed resulting in a small proportion of investors doing the majority of the trading with the highest cumulative value. These frequent trading investors tend to be male, younger and make use of multiple mediums of trading to trade. These mediums include the internet, the telephone, an advice team and use of stop losses.

Keywords: trading frequency; gender, age; trading medium;

JEL Classification: G11, G12