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The performance of amateur traders on a public internet site: a case of a stock-exchange contest

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  • Blanchard, michel
  • Bernard, philippe

Abstract

We analyze a very thorough data base, including all of the bid/ask orders and daily portfolio values of more than 600 on-line amateur traders from February 2007 to June 2009. These traders were taking part in a stock-exchange contest proposed by the French Internet stock-exchange site Zonebourse. More than 80% of traders lose relative to the market. Their relative average annual performance varies from -38% to -60%, depending on the method used. In absolute, more than 99% of traders lose and face drastic losses: on average, portfolio values fall from an initial value of 100 to a terminal value of 7 in the 29 months covered here. When we include the rewards offered by the contest, average performance becomes -13% a year. However, only two deciles continue to beat the market. From an initial value of 100 the final value is 28 including rewards, but 95% of traders still lose in absolute. There is no clear performance persistence for traders. Are the best traders just lucky then? Focusing on contest winners, the long-term transition analysis suggests a long-term probability of staying in the best decile which is greater than chance. We thus cannot reject a “star effect” of staying in the best decile. However, the great majority of amateurs do seem to be e-pigeons. Online trading may just be costly entertainment, like casino gambling.

Suggested Citation

  • Blanchard, michel & Bernard, philippe, 2011. "The performance of amateur traders on a public internet site: a case of a stock-exchange contest," MPRA Paper 34304, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:34304
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    References listed on IDEAS

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    More about this item

    Keywords

    Behavioral finance; finance; online trading; amateur traders ; e-pigeons; trade losses;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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