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- Publisher Website: 10.1016/j.jbankfin.2013.04.036
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Article: Overconfident Individual Day Traders: Evidence from the Taiwan Futures Market
Title | Overconfident Individual Day Traders: Evidence from the Taiwan Futures Market |
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Authors | |
Keywords | Day traders Index futures Individual investors Learning Overconfidence |
Issue Date | 2013 |
Publisher | Elsevier. The Journal's web site is located at http://www.elsevier.com/locate/jbf |
Citation | Journal of Banking and Finance, 2013, v. 37 n. 9, p. 3548-3561 How to Cite? |
Abstract | A specific day-trading policy in Taiwan futures market allows an investigation of the performance of day traders. Since October 2007, investors who characterize themselves as “day traders” by closing their day-trade positions on the same day enjoy a 50% reduction in the initial margin. Because we can identify day traders ex ante, we have a laboratory to explore trading behavior without the contamination of potential behavioral biases. Our results show that the 3470 individual day traders in the sample incur on average a significant loss of 61,500 (26,700) New Taiwan dollars after (before) transaction costs over October 2007–September 2008. This implies that day traders are not only overconfident about the accuracy of their information but also biased in their interpretations of information. We also find that excessive trading is hazardous only to the overconfident losers, but not to the winners. Last, we provide evidence that more experienced individual investors exhibit more aggressive day trading behavior, although they do not learn their types or gain superior trading skills that could mitigate their losses. |
Persistent Identifier | http://hdl.handle.net/10722/184789 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Kuo, WY | en_US |
dc.contributor.author | Lin, TC | en_US |
dc.date.accessioned | 2013-07-15T10:09:10Z | - |
dc.date.available | 2013-07-15T10:09:10Z | - |
dc.date.issued | 2013 | en_US |
dc.identifier.citation | Journal of Banking and Finance, 2013, v. 37 n. 9, p. 3548-3561 | en_US |
dc.identifier.uri | http://hdl.handle.net/10722/184789 | - |
dc.description.abstract | A specific day-trading policy in Taiwan futures market allows an investigation of the performance of day traders. Since October 2007, investors who characterize themselves as “day traders” by closing their day-trade positions on the same day enjoy a 50% reduction in the initial margin. Because we can identify day traders ex ante, we have a laboratory to explore trading behavior without the contamination of potential behavioral biases. Our results show that the 3470 individual day traders in the sample incur on average a significant loss of 61,500 (26,700) New Taiwan dollars after (before) transaction costs over October 2007–September 2008. This implies that day traders are not only overconfident about the accuracy of their information but also biased in their interpretations of information. We also find that excessive trading is hazardous only to the overconfident losers, but not to the winners. Last, we provide evidence that more experienced individual investors exhibit more aggressive day trading behavior, although they do not learn their types or gain superior trading skills that could mitigate their losses. | - |
dc.language | eng | en_US |
dc.publisher | Elsevier. The Journal's web site is located at http://www.elsevier.com/locate/jbf | - |
dc.relation.ispartof | Journal of Banking and Finance | en_US |
dc.rights | NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Banking and Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Banking and Finance, 2013, v. 37 n. 9, p. 3548-3561. DOI: 10.1016/j.jbankfin.2013.04.036 | - |
dc.rights | This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. | - |
dc.subject | Day traders | - |
dc.subject | Index futures | - |
dc.subject | Individual investors | - |
dc.subject | Learning | - |
dc.subject | Overconfidence | - |
dc.title | Overconfident Individual Day Traders: Evidence from the Taiwan Futures Market | en_US |
dc.type | Article | en_US |
dc.identifier.email | Lin, TC: chunlin@hku.hk | en_US |
dc.identifier.authority | Lin, TC=rp01077 | en_US |
dc.description.nature | postprint | - |
dc.identifier.doi | 10.1016/j.jbankfin.2013.04.036 | - |
dc.identifier.scopus | eid_2-s2.0-84879451668 | - |
dc.identifier.hkuros | 216211 | en_US |
dc.identifier.hkuros | 231198 | - |
dc.identifier.isi | WOS:000322428600018 | - |