49 Pages Posted: 20 Mar 2006 Last revised: 14 May 2014
Date Written: February 15, 2009
Using a large sample of individual investor records over a nine-year period, we analyze survival rates, the disposition effect and trading performance at the individual level to determine whether and how investors learn from their trading experience. We find evidence of two types of learning: some investors become better at trading with experience, while others stop trading after realizing that their ability is poor. A substantial part of overall learning by trading is explained by the second type. By ignoring investor attrition, the existing literature significantly overestimates how quickly investors become better at trading.
Keywords: Learning, Behavioral Biases, Disposition Effect, Individual Investor Performance
JEL Classification: D10, G10
Suggested Citation: Suggested Citation
By Frank Zhang
By Eugene Fama