Experts Online: An Analysis of Trading Activity in a Public Internet Chat Room
AbstractWe analyze the trading activity in an Internet chat room with approximately 1,300 participants. Traders make posts in real time about their activities. We find these traders are more skilled than retail investors analyzed in other studies. 55% make profits after transaction costs, and they earn $153 per trade. Traders hold their winners 25% longer than their losers. They have statistically significant alphas of 0.41% per day after controlling for the Fama-French factors and momentum. 38% of profits persist in the next year. 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. 42% trade both long and short, with equal success rates, and almost double the profit per trade when short.
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Bibliographic InfoPaper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 200412.
Length: 20 pages
Date of creation: 20 May 2004
Date of revision:
Publication status: Published in Journal of Economic Behavior and Organization 70, 2009, 266-81.
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behavioral finance; familiarity bias; day trading; experts; disposition effect;
Other versions of this item:
- Mizrach, Bruce & Weerts, Susan, 2009. "Experts online: An analysis of trading activity in a public Internet chat room," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 266-281, May.
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G20 - Financial Economics - - Financial Institutions and Services - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-06-02 (All new papers)
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