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Do Individual Investors Learn from Their Trading Experience?

Gina Nicolosi, Liang Peng and Ning Zhu

Yale School of Management Working Papers from Yale School of Management

Abstract: This paper investigates whether individual investors adjust their stock trading according to their stock selection abilities, which can be inferred from their trading history. Fixed-effect panel regressions provide strong evidence that the ability to forecast future stock returns significantly affects investors' trading activity: investors purchase more actively if they are more likely to have stock selection ability. Furthermore, trading experience - measured by the number of purchases, the number of different stocks purchased, and the variance of purchase dollar amounts - significantly helps improve investors' portfolio performance. In addition, we find that learning behavior varies across investors, which corroborates the heterogeneity of individual investors.

Keywords: individual investors; learning; rationality; trading (search for similar items in EconPapers)
Date: 2003-11-01, Revised 2009-09-01
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Related works:
Journal Article: Do individual investors learn from their trading experience? (2009) Downloads
Working Paper: Do individual investors learn from their trading experience (2004) Downloads
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