Uninformative Feedback and Risk Taking: Evidence from Retail Forex Trading

Itzhak Ben-David, Justin Birru and Viktor Prokopenya

No 22146, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We document evidence consistent with retail day traders in the Forex market attributing random success to their own skill and, as a consequence, increasing risk taking. Although past performance does not predict future success for these traders, traders increase trade sizes, trade size variability, and number of trades with gains, and less with losses. There is a large discontinuity in all of these trading variables around zero past week returns: e.g., traders increase their trade size dramatically following winning weeks, relative to losing weeks. The effects are stronger for novice traders, consistent with more intense “learning” in early trading periods.

JEL-codes: G02 G11 G32 (search for similar items in EconPapers)
Date: 2016-04
Note: AP CF
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Published as Itzhak Ben-David & Justin Birru & Viktor Prokopenya, 2018. "Uninformative Feedback and Risk Taking: Evidence from Retail Forex Trading*," Review of Finance, vol 22(6), pages 2009-2036.

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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 (2015)
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