EconPapers    
Economics at your fingertips  
 

Do individual investors learn from their trading experience?

Gina Nicolosi, Liang Peng and Ning Zhu

Journal of Financial Markets, 2009, vol. 12, issue 2, 317-336

Abstract: After analyzing retail investors' stock trades for potential learning behavior, we present evidence that individual investors learn from their trading experience. Initially, we question whether investors' previous forecasting ability (inferred from prior purchases' subsequent risk-adjusted performance) affects their future trade profitability and activity. Indeed, as an investor's inferred ability increases, so does her ensuing trade profitability and intensity. Further, because additional investment experience allows more accurate ability inference, we posit that trading experience should help investors obtain better investment performance. Consistent with this hypothesis, not only do excess portfolio returns improve with account tenure, but we also find that trade quality (i.e., average raw and excess buy-minus-sell returns) significantly increases with experience (i.e., calendar time and account tenure). In sum, individual stock investors do learn, and they consequently adjust their behavior and thus effectively improve their investment performance.

Keywords: Learning; Individual; investors; Rationality; Trading (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1386-4181(08)00032-3
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Do Individual Investors Learn from Their Trading Experience? (2009) Downloads
Working Paper: Do individual investors learn from their trading experience (2004) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:12:y:2009:i:2:p:317-336

Access Statistics for this article

Journal of Financial Markets is currently edited by B. Lehmann, D. Seppi and A. Subrahmanyam

More articles in Journal of Financial Markets from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-03-31
Handle: RePEc:eee:finmar:v:12:y:2009:i:2:p:317-336