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Information Management against Excessive Stock Trading: More or Less? Or Both?

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  • Mosenhauer, Moritz

Abstract

This paper investigates tools to counter excessive stock trading and increase profits for private households participating in the stock market. Creating a stylised hold or trade-scenario in a computer laboratory experiment, I find that by solely changing the information the participants receive, trading activity can be reduced by roughly 30%, increasing trading profits by more than 0.55 percentage points on monthly net returns. In particular, I consider two information treatments. First, I provide the participants with additional information by giving detailed feedback on their actions and outcomes at every turn. Second, when considering whether to hold a given stock or trade it for another one, I restrict participants' information on the recent performance of their allocated stock. Both interventions lead to significant changes in behaviour. Additionally, the 2 × 2 experimental design reveals that the effects stack.

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  • Mosenhauer, Moritz, 2020. "Information Management against Excessive Stock Trading: More or Less? Or Both?," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224549, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc20:224549
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    Cited by:

    1. Trutmann, Kevin & Heinke, Steve & Rieskamp, Jörg, 2023. "Take your time: How delayed information and restricted decision opportunities improve belief formation in investment decisions," Finance Research Letters, Elsevier, vol. 51(C).

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    JEL classification:

    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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