Rationalizing Trading Frequency and Returns
Yosef Bonaparte and
Russell Cooper
No ECO2010/25, Economics Working Papers from European University Institute
Abstract:
Barber and Odean (2000) study the relationship between trading frequency and returns. They find that households who trade more frequently have a lower net return than other households. But all households have about the same gross return. They argue that these results cannot emerge from a model with rational traders and instead attribute these findings to overconfidence. Using a dynamic optimization approach, we find that neither a model with rational agents facing adjustment costs nor various models of overconfidence fit these facts.
Date: 2010
New Economics Papers: this item is included in nep-mst
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