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Do individual investors learn from their trading experience

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  • 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

Suggested Citation

  • Gina Nicolosi & Liang Peng, 2004. "Do individual investors learn from their trading experience," Econometric Society 2004 North American Summer Meetings 532, Econometric Society.
    • Handle: RePEc:ecm:nasm04:532
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    More about this item

    Keywords

    individual investors; learning; rationality; trading;
    All these keywords.

    JEL classification:

    • D19 - Microeconomics - - Household Behavior - - - Other
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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