Do Individual Investors Learn from Their Trading Experience?

28 Pages Posted: 15 Nov 2003

See all articles by Gina Nicolosi

Gina Nicolosi

Northern Illinois University

Liang Peng

Smeal College of Business, The Pennsylvania State University

Ning Zhu

China Academy of Financial Research (CAFR); Yale School of Management; University of California, Davis - Graduate School of Management

Date Written: March 2004

Abstract

This paper investigates whether individual investors adjust their stock trading according to their stock selection abilities, which can be inferred from their trading history. Fixed-effect panel regressions provide strong evidence that the ability to forecast future stock returns significantly affects investors' trading activity: investors purchase more actively if they are more likely to have stock selection ability. Furthermore, trading experience - measured by the number of purchases, the number of different stocks purchased, and the variance of purchase dollar amounts - significantly helps improve investors' portfolio performance. In addition, we find that learning behavior varies across investors, which corroborates the heterogeneity of individual investors.

Keywords: individual investors, learning, rationality, trading

JEL Classification: D19, G14

Suggested Citation

Nicolosi, Gina and Peng, Liang and Zhu, Ning, Do Individual Investors Learn from Their Trading Experience? (March 2004). Yale ICF Working Paper No. 03-32. Available at SSRN: https://ssrn.com/abstract=468720 or http://dx.doi.org/10.2139/ssrn.468720

Gina Nicolosi

Northern Illinois University ( email )

Department of Finance
Barsema Hall
DeKalb, IL 60115
United States
815-753-6391 (Phone)

Liang Peng (Contact Author)

Smeal College of Business, The Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

Ning Zhu

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

Yale School of Management ( email )

135 Prospect Street
Box 208200
New Haven, CT 06520-8200
United States

HOME PAGE: http://pantheon.yale.edu/~nz26/

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States
530-752-3871 (Phone)
530-752-2924 (Fax)

HOME PAGE: http://www.gsm.ucdavis.edu/Faculty/Zhu/

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