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The cross-section of speculator skill: Evidence from day trading

Author

Listed:
  • Barber, Brad M.
  • Lee, Yi-Tsung
  • Liu, Yu-Jane
  • Odean, Terrance

Abstract

We document economically large cross-sectional differences in the before- and after-fee returns earned by speculative traders by analyzing day traders in Taiwan from 1992 to 2006. We sort day traders based on their returns in year y and analyze their performance in year y+1; the 500 top-ranked day traders go on to earn daily before-fee (after-fee) returns of 61.3 (37.9) bps per day; bottom-ranked day traders go on to earn daily before-fee (after-fee) returns of −11.5 (−28.9)bps per day. Less than 1% of the day trader population is able to predictably and reliably earn positive abnormal returns net of fees.

Suggested Citation

  • Barber, Brad M. & Lee, Yi-Tsung & Liu, Yu-Jane & Odean, Terrance, 2014. "The cross-section of speculator skill: Evidence from day trading," Journal of Financial Markets, Elsevier, vol. 18(C), pages 1-24.
    • Handle: RePEc:eee:finmar:v:18:y:2014:i:c:p:1-24
    DOI: 10.1016/j.finmar.2013.05.006
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    References listed on IDEAS

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    More about this item

    Keywords

    Speculative trading; Day traders; Individual investors; Investor performance;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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