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Do Individual Investors Learn from Their Trading Experience?

Listed author(s):
  • Gina Nicolosi
  • Liang Peng
  • Ning Zhu

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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File URL: http://icfpub.som.yale.edu/publications/2428
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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
Contact details of provider: Web page: http://icf.som.yale.edu/

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