Review of Financial Studies Vol. 15 No. 2 2002
Online Investors: Do the Slow Die First?
Abstract
We analyze 1,607 investors who switched from phone-based to online trading during the 1990s. Those who switch to online trading perform well prior to going online, beating the market by more than 2% annually. After going online, they trade more actively, more speculatively, and less profitably than before-lagging the market by more than 3% annually. Reductions in market frictions (lower trading costs, improved execution speed, and greater ease of access) do not explain these findings. Overconfidence-augmented by self-attribution bias and the illusions of knowledge and control-can explain the increase in trading and reduction in performance of online investors.
- Volume
- 15
- Issue
- 2
- Pages
- 455-487
- Sources
- bibtex:phds-export.bib