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Do Individual Investors Learn from Their Trading Experience?

Author

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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.

Suggested Citation

  • Gina Nicolosi & Liang Peng & Ning Zhu, 2003. "Do Individual Investors Learn from Their Trading Experience?," Yale School of Management Working Papers ysm439, Yale School of Management, revised 01 Sep 2009.
  • Handle: RePEc:ysm:somwrk:ysm439
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    File URL: http://icfpub.som.yale.edu/publications/2428
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    References listed on IDEAS

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    More about this item

    Keywords

    individual investors; learning; rationality; trading;

    JEL classification:

    • D19 - Microeconomics - - Household Behavior - - - Other
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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