Uninformative Feedback and Risk Taking: Evidence from Retail Forex Trading

Itzhak Ben-David, Justin Birru and Viktor Prokopenya
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Justin Birru: OH State University
Viktor Prokopenya: Swiss Business School

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: We document that retail day traders in the Forex market attribute random success to their own skill and, as a consequence, increase risk taking. Although past performance provides little information about future success for these traders, they increase leverage and trade concentration with gains, but not with losses. Furthermore, there is a large discontinuity in risk taking around zero past week returns: traders increase leverage dramatically following weeks of small gains, relative to weeks of small losses. The effects are stronger for novice traders, consistent with more intense "learning" in early trading periods.

JEL-codes: D12 D40 L51 (search for similar items in EconPapers)
Date: 2015-03
New Economics Papers: this item is included in nep-ger
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Related works:
Journal Article: Uninformative Feedback and Risk Taking: Evidence from Retail Forex Trading* (2018)
Working Paper: Uninformative Feedback and Risk Taking: Evidence from Retail Forex Trading (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2014-17

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