Is Online Trading Gambling with Peanuts?
AbstractIf individuals derive a small utility from gambling, we should observe high turnover in stock portfolios that are of only marginal importance to them. By the use of detailed individual financial data, as weIl as trades from a Swedish online broker, we measure the frequency and cost of online trading in the cross-section and reject this hypothesis. Investors who have online portfolios that constitute a large share of risky assets are more likely to trade, trade more aggressively when they do trade, have lower trading performance, and less wealth. Trading losses are therefore mainly carried by those who can afford to carry them the least.
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Bibliographic InfoPaper provided by Institute for Financial Research in its series SIFR Research Report Series with number 62.
Length: 38 pages
Date of creation: 15 May 2008
Date of revision:
Contact details of provider:
Postal: Institute for Financial Research Drottninggatan 89, SE-113 60 Stockholm, Sweden
Web page: http://www.sifr.org/
More information through EDIRC
Investor behavior; gambling; online trading; overconfidence;
Find related papers by JEL classification:
- C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-25 (All new papers)
- NEP-CBE-2009-04-25 (Cognitive & Behavioural Economics)
- NEP-SOC-2009-04-25 (Social Norms & Social Capital)
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