Income, trading, and performance: Evidence from retail investors

Dien Giau Bui, Iftekhar Hasan, Chih-Yung Lin and Rui-Xiang Zhai

Journal of Empirical Finance, 2022, vol. 66, issue C, 176-195

Abstract: We examine whether household income influences the trading styles of retail investors and their investment performance. To investigate this question, we use a unique dataset of branch-level trading that contains all retail investors and observe that those investors with high income trade more and earn significantly higher returns in the stock market. In addition, this income effect becomes stronger for highly risky stocks, such as gambling or lottery-like stocks. These findings are in line with the information model theorized by Peress (2004) in which wealthy investors take extra risks by trading more stocks.

Keywords: Household income; Retail investor; Trading behavior; Gambling stocks; Lottery-like stocks (search for similar items in EconPapers)
JEL-codes: G11 G12 G40 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:66:y:2022:i:c:p:176-195

DOI: 10.1016/j.jempfin.2022.01.006

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