Experts online: An analysis of trading activity in a public Internet chat room
AbstractWe analyze the trading activity in an Internet chat room over a 4-year period. The data set contains nearly 9000 trades from 676 traders. We find these traders are more skilled than retail investors analyzed in other studies. 55 percent make profits after transaction costs, and they have statistically significant [alpha] s of 0.17 percent per day after controlling for the Fama-French factors and momentum. Traders hold their winners 25 percent longer than their losers. 42 percent trade both long and short, with equal success rates, and almost double the profit per trade when short. The estimates show a strong influence from other traders, with a buy (sell) order 40.7 percent more likely to be of the same sign if there has been a recent post. Traders improve their skill over time, earning an extra $189 per month for each year of trading experience. They also gain expertise in trading particular stocks. Traders who raise their Herfindahl index by 0.1 raise their profitability by $46 per trade.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Behavior & Organization.
Volume (Year): 70 (2009)
Issue (Month): 1-2 (May)
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Web page: http://www.elsevier.com/locate/jebo
Behavioral finance Day trading Familiarity bias Disposition effect Experts;
Other versions of this item:
- Bruce Mizrach & Susan Weerts, 2004. "Experts Online: An Analysis of Trading Activity in a Public Internet Chat Room," Departmental Working Papers 200412, Rutgers University, Department of Economics.
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G20 - Financial Economics - - Financial Institutions and Services - - - General
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