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Do individual investors learn from their trading experience

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Author Info
Gina Nicolosi
Liang Peng
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

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Paper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 532.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nasm04:532

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Related research
Keywords: individual investors; learning; rationality; trading;

Find related papers by JEL classification:
D19 - Microeconomics - - Household Behavior - - - Other
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies

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