The performance of amateur traders on a public internet site: a case of a stock-exchange contest

We analyze a very thorough data base, including all of the bid/ask orders and daily portfolio values of more than 600 on-line amateur traders from February 2007 to June 2009. These traders were taking part in a stock-exchange contest proposed by the French Internet stock-exchange site Zonebourse. More than 80% of traders lose relative to the market. Their relative average annual performance varies from -38% to -60%, depending on the method used. In absolute, more than 99% of traders lose and face drastic losses: on average, portfolio values fall from an initial value of 100 to a terminal value of 7 in the 29 months covered here. When we include the rewards offered by the contest, average performance becomes -13% a year. However, only two deciles continue to beat the market. From an initial value of 100 the final value is 28 including rewards, but 95% of traders still lose in absolute. There is no clear performance persistence for traders. Are the best traders just lucky then? Focusing on contest winners, the long-term transition analysis suggests a long-term probability of staying in the best decile which is greater than chance. We thus cannot reject a “star effect” of staying in the best decile. However, the great majority of amateurs do seem to be e-pigeons. Online trading may just be costly entertainment, like casino gambling.Behavioral finance, finance, online trading, amateur traders , e-pigeons, trade losses

Information, Overconfidence and Trading: Do the Sources of Information Matter?

We investigate how the strength of the positive association between frequency of trading and information acquisition is dependent on investors’ self-confidence and on the sources of information used by investors. Our results confirm that the more frequently individual investors invest in information, the more they trade in financial products. Our results also confirm previous findings that overconfident investors, who show a better than average bias, trade more frequently. In this paper, we add to this literature by investigating if the strong and positive relationship between investment in information and intensity of trading in financial assets is sensitive to the sources of information used by investors, and if this influence is different for overconfident and non-overconfident investors. We conclude that overconfident investors trade more frequently when they collect information directly using specialized sources and that nonoverconfident investors trade less frequently when they use professional advice from the bank/account manager.Information, overconfidence, investor behaviour, trading, sources of information Classification-G11, G14, D83

Who trades cryptocurrencies, how do they trade it, and how do they perform? Evidence from brokerage accounts

We investigate the demographic characteristics, trading patterns, and performance of 465.926 brokerage accounts with respect to cryptocurrency trading. We find that cryptocurrency trading became increasingly popular across individuals of all different groups of age, gender, and trading patterns. Yet, men are more likely to engage in cryptocurrency trading, trade more frequently, and more speculative, respectively. As a result, men realize lower returns. Furthermore, we find that investors vary their trading patterns across different asset classes

Information, overconfidence and trading : do the sources of information matter?

We investigate how the strength of the positive association between frequency of trading and information acquisition is dependent on investors’ self‐confidence and on the sources of information used by investors. Our results confirm that the more frequently individual investors invest in information, the more they trade in financial products. Our results also confirm previous findings that overconfident investors, who show a better than average bias, trade more frequently. In this paper, we add to this literature by investigating if the strong and positive relationship between investment in information and intensity of trading in financial assets is sensitive to the sources of information used by investors, and if this influence is different for overconfident and non‐overconfident investors. We conclude that overconfident investors trade more frequently when they collect information directly using specialized sources and that nonoverconfident investors trade less frequently when they use professional advice from the bank/account manager.UECE is supported by FCT

Do individual investors trade differently in different markets?

We investigate the hypothesis that the same investors trade differently in different financial markets. We use a proprietary data base with the transaction records of 129,461 investors for a 10-year period, and select the investors holding both stocks and warrants in the port-folio. We compare the trading behavior of investors in the stock market and in the warrant market, controlling for investors’ socio-demographic characteristics (age, occupation, edu-cation, etc.) and for investors’ behavioral biases (overconfidence, the disposition effect and pursuit of the pleasure of gambling). Even though investors are the same in both markets, our results clearly show that the soci-odemographic determinants of the trading activity in stocks and in warrants are not all the same, implying that the same investors trade stocks differently than warrants. More pre-cisely, overconfident investors have a higher warrant trading activity and a lower domestic stock trading activity, and investors pursuing gambling pleasure or prone to the disposition effect trade warrants more (but do not trade stocks more).info:eu-repo/semantics/publishedVersio

Mismatch between investor preferences and financial services/products

In a major peer-to-peer (P.2.P.) lending market in China, we observe that some investors choose not to use auto-investment service and stick to time-consuming manual investment. By analysing over 200 million pieces of data, we find that the do-it-yourself (D.I.Y.) investors pursue 1.20% higher annual return and five to seven months shorter maturity than the auto-investment service can offer. Indeed, D.I.Y. investors obtained 1.25% higher return than auto-investors, but they also took excessive risk. These results are confirmed by dual investors sample, who switch between D.I.Y. and auto-investment services. We also show that the results are not due to algorithm priority. We suggest that financial institutions provide more personalized services and products to accommodate investors with various target returns and risk attitudes