← Search

Just How Much Do Individual Investors Lose by Trading?

Brad M. Barber¹; Yi-Tsung Lee²; Yu-Jane Liu^2,3; Terrance Odean⁴

¹ Graduate School of Management, University of California · ² National Chengchi University · ³ Peking University · ⁴ Haas School of Business University of California

Individual investor trading results in systematic and economically large losses. Using a complete trading history of all investors in Taiwan, we document that the aggregate portfolio of individuals suffers an annual performance penalty of 3.8 percentage points. Individual investor losses are equivalent to 2.2% of Taiwan's gross domestic product or 2.8% of the total personal income. Virtually all individual trading losses can be traced to their aggressive orders. In contrast, institutions enjoy an annual performance boost of 1.5 percentage points, and both the aggressive and passive trades of institutions are profitable. Foreign institutions garner nearly half of institutional profits.

DOI

10.1093/rfs/hhn046

Volume

22 (2)

Pages

609-632

Language

en

Export

BibTeX

Sources

openalex crossref