Online Investors: Do the Slow Die First?

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Online Investors: Do the Slow Die First?

Author Info

Brad M. Barber (University of California, Davis)
Terrance Odean (University of California, Berkeley)

Abstract

We analyze 1,607 investors who switched from phone-based to online trading during the 1990s. Those who switch to online trading perform well prior to going online, beating the market by more than 2% annually. After going online, they trade more actively, more speculatively, and less profitably than before--lagging the market by more than 3% annually. Reductions in market frictions (lower trading costs, improved execution speed, and greater ease of access) do not explain these findings. Overconfidence--augmented by self-attribution bias and the illusions of knowledge and control--can explain the increase in trading and reduction in performance of online investors. Copyright 2002, Oxford University Press.

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Publisher Info
Article provided by Oxford University Press for Society for Financial Studies in its journal Review of Financial Studies.

Volume (Year): 15 (2002)
Issue (Month): 2 (March)
Pages: 455-488
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Handle: RePEc:oup:rfinst:v:15:y:2002:i:2:p:455-488

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