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Do Individual Investors Learn from Their Trading Experience?

Author

Listed:
  • Gina Nicolosi
  • Liang Peng
  • Ning Zhu

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.

Suggested Citation

  • Gina Nicolosi & Liang Peng & Ning Zhu, 2003. "Do Individual Investors Learn from Their Trading Experience?," Yale School of Management Working Papers ysm439, Yale School of Management, revised 01 Sep 2009.
    • Handle: RePEc:ysm:wpaper:ysm439
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    File URL: https://repec.som.yale.edu/icfpub/publications/2428.pdf
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