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Do Individual Investors Learn from Their Trading Experience?

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  • Gina Nicolosi
  • Liang Peng
  • Ning Zhu

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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Bibliographic Info

Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm439.

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Date of creation: 01 Nov 2003
Date of revision: 01 Sep 2009
Handle: RePEc:ysm:somwrk:ysm439

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Web page: http://icf.som.yale.edu/
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Keywords: individual investors; learning; rationality; trading;

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