Who trades profusely? The characteristics of individual investors who trade frequently

Abstract

Research has shown that investors trade too frequently and that this overtrading lowers investment return. This paper examines the characteristics of those investors that trade frequently. Using over three years of trading data of 7 200 investors at a brokerage firm in the UK, descriptive statistics and multiple regression analyses were able to identify the predictive characteristics of investors that trade often. Most noteworthy is that trading frequency is positively skewed resulting in a small proportion of investors doing the majority of the trading with the highest cumulative value. These frequent trading investors tend to be male, younger and make use of multiple mediums of trading to trade. These mediums include the internet, the telephone, an advice team and use of stop losses.

Theoretical and experimental evidence on stock market volatilities: a two-phase flow model

“…However, they also note that such a relationship disappears in unilaterally price-falling markets. Additionally, the above study investigates the effects of gender and personality on the relationship between trading volume and stock returns, which are confirmed by many studies using the real stock market data, e.g., Richards and Willows (2018) and Zhang et al (2019). Thus, the study of Zhang et al (2014) provides solid support to the method of simulation from the real stock markets.…”

Is the disposition effect related to investors’ reliance on System 1 and System 2 processes or their strategy of emotion regulation?

“…However, it is important to note that the generalizability of this research is only for actively trading investors and not all investors. Investors who trade actively tend to be younger, male, and are more likely to use stop losses (Barber & Odean, 2001;Korniotis & Kumar, 2011;Richards & Willows, 2017). variables were included in our analysis.…”

Monday mornings: Individual investor trading on days of the week and times within a day

“…However, Richards and Willows (2018) found trading frequency to be positively skewed across individual investors, in that a small proportion of individual investors are responsible for most of the trading. Moreover, advised investors make statistically significantly more trades than non-advised investors (Allie, West, & Willows, 2016;Richards & Willows, 2018). These studies emphasize that the behavior of trading frequently amongst individual investors occurs globally.…”