Do Early Birds Behave Differently from Night Owls in the Stock Market?

Abstract

This study is the first to apply human beings' preferred diurnal rhythm, that is, morningness or eveningness, to the field of behavioural finance. Employing proprietary stock trading data from a leading retail brokerage house in Australia, we classify retail investors into M-types (‘early birds’) and E-types (‘night owls’) based on the time of their order submission. Demographic differences between the two groups (M-types or E-types) are found to be weak. We provide robust evidence that M-type investors are distinctively different from E-type investors in their proneness to stock market behavioural biases. We find that M-type investors trade more frequently and have a stronger preference for stock market speculation.

Keywords: Morningness-eveningness, Lottery stocks, Frequent trading, Speculation, Investor bias, Investor characteristics

JEL Classification: G41