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Does Trading Improve Individual Investor Performance?


  • Pei-Gi Shu


  • Shean-Bii Chiu
  • Hsuan-Chi Chen
  • Yin-Hua Yeh


From 52,649 accounts and 10,615,117 transaction records obtained from a renowned brokerage house in Taiwan we find that individual investors purchase 73.4% and sell 64.5% of their stock portfolios each month. This is more than ten times the statistics for their U.S. counterparts. In general, individual investors have positive abnormal returns from factor-based models. However, they would have earned higher returns from following a buy-and-hold strategy. We find a U-shaped rather than a monotonic turnover and performance relation. The results do not support the overconfidence argument proposed by Barber and Odean (2000, 2001) nor does the rational model of Grossman and Stiglitz (1980). We find that investors with large portfolio values tend to be informed traders whose excess trading does create performance value. We also investigate whether men are more overconfident than women and find that even though men trade more excessively than women, men's performance measures are not dramatically lower than women's. Specifically, the own-benchmark adjusted gross return for men is higher than that for women. The regression results indicate that electronic traders rather than men are overconfident.

Suggested Citation

  • Pei-Gi Shu & Shean-Bii Chiu & Hsuan-Chi Chen & Yin-Hua Yeh, 2004. "Does Trading Improve Individual Investor Performance?," Review of Quantitative Finance and Accounting, Springer, vol. 22(3), pages 199-217, May.
  • Handle: RePEc:kap:rqfnac:v:22:y:2004:i:3:p:199-217

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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Investidor Pessoa Física
      by Roberto Ushisima in Empresas e Mercados on 2009-09-22 20:34:00


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    Cited by:

    1. Kourtidis, Dimitrios & Šević, Željko & Chatzoglou, Prodromos, 2011. "Investors’ trading activity: A behavioural perspective and empirical results," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(5), pages 548-557.
    2. Hackethal, Andreas & Haliassos, Michael & Jappelli, Tullio, 2012. "Financial advisors: A case of babysitters?," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 509-524.
    3. Markus Glaser & Martin Weber, 2007. "Overconfidence and trading volume," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 32(1), pages 1-36, June.

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