Justhowmuchdoindividualinvestorslose Rfs 2009
Justhowmuchdoindividualinvestorslose Rfs 2009
Justhowmuchdoindividualinvestorslose Rfs 2009
by Trading?
Brad M. Barber
Graduate School of Management, University of California
Yi-Tsung Lee
National Chengchi University
Yu-Jane Liu
Guanghua School, Peking University and National Chengchi University
Terrance Odean
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. In-
dividual 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 per-
centage points, and both the aggressive and passive trades of institutions are profitable.
Foreign institutions garner nearly half of institutional profits. (JEL G11, G14, G15, H31)
We are grateful to the Taiwan Stock Exchange for providing the data used in this study. Michael Bowers provided
excellent computing support. Barber appreciates the National Science Council of Taiwan for underwriting a
visit to Taipei, where Timothy Lin (Yuanta Core Pacific Securities) and Keh Hsiao Lin (Taiwan Securities)
organized excellent overviews of their trading operations. We appreciate the comments of Ken French, Charles
Jones, Owen Lamont, Mark Kritzberg, Victor W. Liu, and seminar participants at UC Berkeley School of
Law, UC-Davis, University of Illinois, the Indian School of Business, National Chengchi University, University
of North Carolina, University of Texas, Yale University, the Wharton 2004 Household Finance Conference,
American Finance Association 2006 Boston Meetings, the Taiwan Financial Supervisory Commission, and the
12th Conference on the Theory and Practice of Securities and Financial Markets (Taiwan). Terrance Odean is
grateful for the financial support of the National Science Foundation (grant no. 0222107). Yu-Jane Liu gratefully
acknowledges the financial support from National Natural Science Foundation of China (grant no. 70432002).
Address correspondence to Terrance Odean, Haas School of Business, University of California, Berkeley, CA
94720; telephone: 510-642-6767; e-mail: odean@haas.berkeley.edu and faculty.haas.berkeley.edu/odean.
C The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies.
All rights reserved. For Permissions, please e-mail: journals.permissions@oxfordjournals.org.
doi:10.1093/rfs/hhn046 Advance Access publication April 19, 2008
The Review of Financial Studies / v 22 n 2 2009
can be traced to their aggressive (rather than passive) orders. To do so, we use a
unique and remarkably complete dataset, which contains the entire transaction
data, underlying order data, and the identity of each trader in the Taiwan stock
market—the world’s 12th largest financial market. With these data, we provide
a comprehensive accounting of the gains and losses from trade during the period
1995–1999.
Our data allow us to identify trades made by individuals and by institutions,
which fall into one of four categories: corporations, dealers, foreigners, or mu-
tual funds. To analyze who gains and loses from trade, we construct portfolios
that mimic the purchases and sales of each investor group. If stocks bought by
an investor group reliably outperform those that they sell, the group benefits
from trade. In addition, using the orders underlying each trade, we are able to
examine whether gains and losses can be attributed to aggressive or passive
orders.
Our empirical analysis presents a clear portrait of who benefits from trade:
individuals lose, institutions win. While individual investors incur substantial
losses, each of the four institutional groups that we analyze—corporations,
dealers, foreigners, and mutual funds—gain from trade. Though we analyze
horizons up to one year following a trade, our empirical analyses indicate that
most of the losses by individuals (and gains by institutions) accrue within a few
weeks of trade and reach an asymptote at a horizon of six months.
Several prior studies provide evidence that individual investors lose from
trade,1 while institutions profit.2 Relative to prior research, the combination
of a comprehensive dataset (all trades for an entire market) and the empirical
methods we employ provide more convincing evidence that individuals lose
from trade.
The comprehensiveness of our dataset allows us to go beyond the mere doc-
umentation of trading losses and make two important contributions relative to
the prior research. First, we document that the losses incurred by individual
investors are economically large. We estimate the total losses to individual
1
For studies of the performance of individual investors, see Schlarbaum, Lewellen, and Lease (1978a, 1978b);
Odean (1999); Barber and Odean (2000, 2001); Grinblatt and Keloharju (2000); Goetzmann and Kumar (forth-
coming); and Linnainmaa (2003a, 2003b). Recent research suggests that some trades by individual investors
are systematically profitable. Ivkovich and Weisbenner (2004) document that the local holdings of individual
investors perform well, while Ivkovich, Sialm, and Weisbenner (forthcoming) document that individuals with
concentrated portfolios perform well. Coval, Hirshleifer, and Shumway (2005) provide evidence that some in-
dividual investors are systematically better than others. Other related work includes Lee, Shleifer, and Thaler
(1991); Sias and Starks (1997); Bartov, Radhakrishnan, and Krinsky (2000); Chakravarty (2001); and Poteshman
and Serbin (2003).
2
For studies of mutual fund performance, see Carhart (1997); Chan, Jegadeesh, and Wermers (2000); Coval
and Moskowitz (2001); Daniel et al. (1997); Grinblatt and Titman (1989, 1993); and Wermers (2000). For
studies of pension fund performance, see Ferson and Khang (2002); Lakonishok, Shleifer, and Vishny (1992);
Coggin, Fabozzi, and Rahman (1993); Christopherson, Ferson, and Glassman (1998); Delguercio and Tkac
(2002); Coggin and Trzcinka (2000); and Ikenberry, Shockley, and Womack (1998). In analyses of hedge funds,
Ackermann, McEnally, and Ravenscraft (1999); Brown, Goetzmann, and Ibbotson (1999); Liang (1999); and
Agrawal and Naik (2000) provide evidence of superior returns, though Amin and Kat (2003) argue that hedge fund
performance results may be attributable to the skewed nature of hedge fund payoffs, which when appropriately
accounted for, renders hedge fund performance unremarkable.
610
Just How Much Do Individual Investors Lose by Trading?
investors to be $NT 935 billion ($US 32 billion) during our sample period or
$NT 187 billion annually ($US 6.4 billion). (The average exchange rate that
prevailed during our sample period was $NT 29.6 per $US 1 with a low of
24.5 and a high of 34.7 $NT/$US.) This is equivalent to a staggering 2.2% of
Taiwan’s gross domestic product (GDP) or roughly 33, 85, and 170% of to-
tal private expenditures on transportation/communication, clothing/footwear,
and fuel/power (respectively). Put differently, it is a 3.8 percentage point an-
nual reduction in the return on the aggregate portfolio of individual investors.
These losses can be broken down into four categories: trading losses (27%),
commissions (32%), transaction taxes (34%), and market-timing losses (7%).
The trading and market-timing losses of individual investors represent gains
for institutional investors. The institutional gains are eroded, but not eliminated
by the commissions and transaction taxes that they pay. We estimate that
aggregate portfolio of institutional investors enjoys annual abnormal returns
of 1.5 percentage points after commissions and transaction taxes (but before
any fees the institutions might charge their retail customers). When profits are
tracked over six months, foreigners earn nearly half of all institutional profits;
at shorter horizons, foreigners earn one-fourth of all institutional profits. The
profits of foreigners represent an unambiguous wealth transfer from Taiwanese
individual investors to foreigners. Whether the remaining institutional profits
represent a wealth transfer depends on who benefits when domestic institutions
profit.
A distinguishing feature of our dataset is data on the orders underlying each
trade. This feature of our dataset leads to the second main contribution of
our study: virtually all of the losses incurred by individuals can be traced to
their aggressive orders. In contrast, institutions profit from both their passive
and aggressive trades.3 (All orders on the Taiwan Stock Exchange (TSE) are
limit orders. We define aggressive limit orders to be buy limit orders with high
prices and sell limit orders with low prices—both relative to unfilled orders at
the last market clearing; we define passive limit orders to be buy limit orders
with low prices and sell limit orders with high prices. Sixty-four percent of all
trades emanate from aggressive orders.) At short horizons (up to one month),
the majority of institutional gains can be traced to passive trades. The prof-
its associated with passive trades are realized quickly, as institutions provide
liquidity to aggressive, but apparently uninformed, investors. The profits asso-
ciated with the aggressive trades of institutions, which are likely motivated by
an informational advantage, are realized over longer horizons.
The remainder of the paper is organized as follows. Our data, the Taiwan
market, and empirical methods are described in detail in Section 1. We present
our main results in Section 2, where we estimate the magnitude of losses
3
Parlour (1998); Foucault (1999); and Handa, Schwartz and Tiwari (2003) explore the choice between demanding
liquidity with market or marketable limit orders and supplying liquidity with limit orders that cannot be imme-
diately executed. Griffiths et al. (2000) find that aggressive buys are more likely than sells to be motivated by
information.
611
The Review of Financial Studies / v 22 n 2 2009
and trace these losses to aggressive and passive orders underlying trade. In
Section 3, we discuss the economic significance of the gains and losses. In
Section 4, we discuss possible reasons why Taiwanese investors trade actively.
We make concluding remarks in Section 5.
612
Just How Much Do Individual Investors Lose by Trading?
Table 1
Basic descriptive statistics for the Taiwan Stock Exchange
Year Return Listed firms Mean Turnover No. of No. of trades Day trade as
percentage market cap percentage traders percentage of
($TW billion) all trades
The market index is a value-weighted index of all stocks traded on the TSE. Mean market capitalization (market
cap) is calculated as the sum of daily market caps divided by the number of trading days in the year. Turnover is
calculated as half the value of buys and sells divided by the market cap. Number of traders and number of trades
are from the TSE dataset. Day trades are defined as purchases and sales of the same stock on the same day by
one investor. Day-trade percentage of all trades is based on the value of trade; percentages based on number of
trades are similar.
613
The Review of Financial Studies / v 22 n 2 2009
Table 2
Trade descriptive statistics by trader type: 1995–1999
Total value of trade Average trade size Percentage of all trades
($NT billion) ($NT) (by value)
345% in 1999).4 Day trading is also prevalent in Taiwan (see last column of
Table 1). We define day trading as the purchase and sale of the same stock on
the same day by an investor. Over our sample period, day trading accounted
for 23% of the total dollar value of trading volume. (See Barber, Lee, Liu and
Odean (2004) for a detailed analysis of day trading on the TSE.)
We restrict our analysis to ordinary common stocks. In Table 2, we present
the total value of buys and sells of stocks for each investor group by year.
Individual investors account for roughly 90% of all trading volume and place
trades that are roughly half the size of those made by institutions (corporations,
dealers, foreigners, and mutual funds). Each of the remaining groups accounts
for less than 5% of total trading volume. During our five-year sample period,
there were approximately 3.9 million individual investors, 24,000 corporations,
83 dealers, 1,600 foreigners, and 289 mutual funds that traded on the TSE.
Equities are an important asset class for Taiwanese. According to the 2000
Taiwan Stock Exchange Factbook (Table 24), individual investors accounted
for between 56% and 59% of total stock ownership during our sample period.
Taiwan corporations owned between 17% and 23% of all stocks, while for-
eigners owned between 7% and 9%. At the end of 2000, Taiwan’s population
reached 22.2 million; 6.8 million Taiwanese (31%) placed orders through a
brokerage account.5
Stocks are broadly held in Taiwan and are an important asset class for many
households in Taiwan. Each year, the Taiwan Ministry of Finance collects the
asset holdings for all households with taxable and nontaxable income. We
analyze these data over the period 1997–2002. On average, about half of the
reporting households own equities (ranging from 49% to 56%). For those who
own equity, the majority (70%) of these equity holdings are public equities.
Less than 1% of equities are held through mutual funds, while the remaining
4
Turnover data for China are from Table 30 of Gao (2002). Turnover data for Korea are from the Taiwan Financial
Supervision Commission.
5
The data of Taiwan’s population are from the Directorate General of Budget, Accounting and Statistics, Executive
Yuan, Taiwan. We report 6.8 million Taiwanese open accounts using the order data from the TSE. The number
of opened accounts is 12.3 million. (Data are from the web site of the TSE.)
614
Just How Much Do Individual Investors Lose by Trading?
Table 3
Equity to total assets for households owning equity
Negative net worth Quartile of household net worth (conditional on positive net worth) All
1 (Low) 2 3 4 (High)
equities are privately held stock.6 We present in Table 3 the ratio of equity
value to total assets and to total assets excluding real estate. For all households
owning equity, equities average 24% of total assets and 45% of non-real-estate
assets. We further partition households into quartiles based on net worth and
separately report results for households with negative net worth (about 3% of
households report negative net worth). Though the wealthy no doubt own the
majority of equities, the less well off have substantial portions of their assets
invested in equities. By comparison, less wealthy investors in the United States
tend to have a somewhat lower proportion of their assets invested in equities
than do wealthier investors (Polkovnichenko, 2005). One possible reason why
less wealthy Taiwanese households participate so actively in the stock market is
that the market provides an opportunity to gamble. We discuss this possibility
further in Section 4.
6
Data are from Major Indicators of Securities & Futures Market, Financial Supervisory Commission, Executive
Yuan, Taiwan and Annual Statistical Data, TSE; http://www.tse.com.tw/en/statistics/statistics_list.php?tm =
07&stm = 025.
615
The Review of Financial Studies / v 22 n 2 2009
7
The indeterminant category also includes trades that we are unable to match to an order. We discussed this issue
with the TSE and they suspect that data entry errors in the order records are the source of the problem. Though
annoying, this type of data error should not introduce any bias into our results.
616
Just How Much Do Individual Investors Lose by Trading?
where Rft is the monthly return on T-Bills,9 Rmt is the monthly return on a
value-weighted Taiwan market index, SMBt is the return on a value-weighted
portfolio of small stocks minus the return on a value-weighted portfolio of
big stocks, HMLt is the return on a value-weighted portfolio of high book-
to-market stocks minus the return on a value-weighted portfolio of low book-
to-market stocks, and WMLt is the return on a value-weighted portfolio of
stocks with high recent returns minus the return on a value-weighted portfolio
of stocks with low recent returns. The construction of the size and book-to-
market portfolios is identical to that in Fama and French (1993). The WML
return is constructed based on a six-month formation period and a six-month
holding period. The regression yields parameter estimates of αj , βj , sj , hj , and
wj for regression j. The error term in the regression is ε jt .
8
There is a small, but reliably positive autocorrelation of total profits at a one-day horizon (ranging from 6.3%
to 14.2%). No autocorrelations beyond one day are reliably different from zero. To test the robustness of our
profit results, we also calculate monthly returns on the buy and sell portfolios. Monthly portfolio returns for all
investor partitions have no reliable serial dependence.
9
We use the series of one-month deposit rates of the First Commercial Bank as the risk-free rate. This interest rate
series is taken from Financial Statistics Monthly, Taiwan District, ROC, and is compiled by the Central Bank of
China.
617
The Review of Financial Studies / v 22 n 2 2009
2. Results
T
CART = τ − MAτ
MAbuy sell
. (2)
τ=1
618
Just How Much Do Individual Investors Lose by Trading?
Figure 1
Cumulative (market-adjusted) abnormal returns (CARs) in event time for stocks bought less stocks sold
by institutions and individuals
Panel A: CARs are weighted by aggregate value of stocks bought and stocks sold. Panel B: CARs are weighted
by net value of stocks bought and sold.
619
The Review of Financial Studies / v 22 n 2 2009
10
Stocks bought and stocks sold by individuals (or by institutions) can both perform well if market gains are
concentrated in high-volume stocks. In the United States, Gervais, Kaniel, and Mingelgrin (2001) document that
high-volume stocks subsequently earn high returns.
11
The profits of stocks bought (and sold) by each of the four institutional subcategories do not sum to the profits
for all institutions because we analyze only net purchases (or sales) for each stock within a subcategory or across
all institutions. However, total profits (profits of buy portfolio less sell portfolio) for each of the four institutional
subcategories sum up to the total profits for all institutions.
620
Just How Much Do Individual Investors Lose by Trading?
Table 4
Mean daily dollar profit from trade for various trading groups in Taiwan: 1995–1999
Buys–Sells Buys Sells Buys–Sells Buys–Sells Buys Sells Buys–Sells
All All All Passive Aggressive All All All Passive Aggressive
1 day
Corporations 13.9 6.0 −7.9 13.1 0.2 9.32 5.00 −6.47 13.88 0.24
Dealers 3.2 0.4 −2.8 3.3 −0.4 6.28 0.82 −5.53 12.56 −1.11
Foreigners 9.5 5.7 −3.8 5.1 3.5 8.94 6.45 −6.06 13.31 4.91
Mutual funds 8.4 2.3 −6.2 6.6 1.5 6.61 1.95 −5.48 14.97 1.90
All institutions 35.3 14.2 −21.1 27.7 5.2 13.42 6.33 −10.16 18.29 3.07
Individuals −35.3 −21.1 14.2 71.5 −100.9 −13.42 −10.16 6.33 12.21 −14.86
10 days
Corporations 22.3 8.6 −13.7 18.4 −0.4 4.95 2.22 −3.16 8.05 4.95
Dealers 3.9 4.1 0.2 3.5 0.1 3.47 1.85 0.11 6.20 3.49
Foreigners 14.2 12.9 −1.3 6.4 5.7 4.16 4.08 −0.59 6.58 4.14
Mutual funds 18.8 15.9 −2.9 11.2 6.1 3.91 3.16 −0.64 7.79 3.85
All institutions 59.4 33.1 −26.3 39.2 12.0 7.62 4.37 −3.46 12.18 7.54
Individuals −59.4 −26.3 33.1 70.7 −129.2 −7.62 −3.46 4.37 5.03 −7.54
25 days
Corporations 23.1 6.8 −16.3 18.9 −2.5 2.91 0.85 −1.83 4.95 −0.59
Dealers 3.2 9.1 5.9 2.8 0.2 1.87 1.78 1.16 3.44 0.14
Foreigners 22.5 26.3 3.8 8.0 11.5 3.36 3.83 0.81 4.71 2.41
Mutual funds 25.0 31.5 6.5 12.8 11.1 2.98 2.89 0.65 5.00 2.10
All institutions 74.0 52.6 −21.4 42.2 20.8 5.32 3.25 −1.29 7.88 2.29
Individuals −74.0 −21.4 52.6 34.1 −107.7 −5.32 −1.29 3.25 1.47 −4.26
140 days
Corporations 18.9 17.5 −1.4 19.2 −14.0 0.70 0.51 −0.04 1.65 −0.73
Dealers 12.3 40.9 28.6 4.2 8.0 4.09 1.61 1.13 2.25 2.54
Foreigners 84.7 120.5 35.8 21.9 54.2 3.88 3.77 1.82 3.72 3.60
Mutual funds 62.5 126.3 63.8 22.3 37.2 3.58 2.38 1.24 4.05 3.12
All institutions 178.7 193.7 15.0 67.3 85.8 4.68 2.57 0.18 4.51 3.22
Individuals −178.7 15.0 193.7 −27.0 −157.6 −4.68 0.18 2.57 −0.35 −1.91
On each day, the dollar profit from trade is calculated as the dollar gain on the buy portfolio (net of any
market gain) less the dollar gain on the sell portfolio (net of any market gain). Portfolios are based on net daily
buys (or sells) of each investor group. Buy and sell portfolios are constructed assuming a holding period of
1, 10, 25, and 140 trading days. The table presents the mean daily dollar profit across all trading days. Test
statistics are calculated using the time series of daily dollar profits. Profits are further partitioned based upon
whether the order underlying the trade was aggressive or passive (see the text for definitions of aggressive and
passive).
The results of our abnormal return and dollar profit calculations raise the
obvious question of whether these gains grow at longer horizons. We also an-
alyze holding periods of one year. The dollar profits remain reliably positive
for institutions and reliably negative for individuals. The average daily insti-
tutional gains from trade (and individual losses) are virtually identical at the
one-year and six-month horizon (see also Figure 1). To test the robustness of
these results, we calculate the average daily institutional gross profits for each
calendar year from 1995 to 1999. In each year, mean daily institutional profits
are positive (reliably so in four of the five sample years). Furthermore, when
we sum daily profits within each month, institutions profit in fourty-four out of
sixty months during our sample period.
621
The Review of Financial Studies / v 22 n 2 2009
622
Just How Much Do Individual Investors Lose by Trading?
Table 5
Trading profits by firm size for various trading groups in Taiwan: 1995–1999
Large firms Small firms
All Pass. Agg. All Pass. Agg. All Pass. Agg. All Pass. Agg.
1 day 1 day
Corporations 6.8 7.5 −0.6 6.99 12.25 −1.17 7.1 5.5 0.8 9.22 11.42 2.07
Dealers 1.2 2.0 −1.0 3.03 10.67 −3.18 1.9 1.2 0.5 8.52 10.53 3.20
Foreigners 6.5 3.8 2.2 7.13 11.29 3.55 3.0 1.3 1.3 9.08 11.97 6.04
Mutual funds 1.8 3.4 −1.4 1.90 10.98 −2.10 6.4 3.1 2.9 10.55 13.74 7.86
All institutions 16.5 16.6 −0.4 8.56 16.35 −0.31 18.6 11.1 5.6 15.82 16.38 8.47
Individuals −16.5 52.2 −64.2 −8.56 11.59 −13.55 −18.6 19.5 −36.6 −15.82 9.49 −13.64
10 days 10 days
Corporations 9.1 9.3 −1.5 2.61 5.06 −0.87 13.2 9.0 1.1 6.22 8.75 0.88
Dealers 1.7 2.2 −0.4 1.93 4.84 −0.57 2.1 1.3 0.5 3.83 5.02 1.23
Foreigners 10.0 4.9 3.9 3.39 6.06 1.82 4.2 1.4 1.9 3.83 3.66 2.76
Mutual funds 7.4 5.7 2.0 2.19 5.51 0.86 11.4 5.5 4.2 4.38 6.74 2.67
All institutions 28.3 22.0 4.3 4.95 9.11 1.05 31.0 17.2 7.7 8.47 11.98 3.35
Individuals −28.3 52.3 −79.0 −4.95 4.62 −7.31 −31.0 18.5 −49.7 −8.47 3.76 −8.97
25 days 25 days
Corporations 5.8 7.0 −3.3 0.93 2.04 −1.06 17.4 11.9 0.7 4.91 6.82 0.30
Dealers 2.2 2.1 0.2 1.69 3.25 0.21 1.0 0.7 0.0 1.17 1.56 0.00
Foreigners 16.3 5.6 9.5 2.78 3.81 2.17 6.2 2.4 2.1 3.34 3.90 2.00
Mutual funds 12.8 6.7 6.9 2.31 3.76 1.86 12.5 6.3 4.5 2.74 4.50 1.65
All institutions 37.3 21.2 13.7 3.88 5.13 1.97 37.3 21.2 7.4 5.50 8.67 1.74
Individuals −37.3 22.1 −58.0 −3.88 1.21 −3.06 −37.3 12.3 −50.3 −5.50 1.47 −5.02
140 days 140 days
Corporations −13.1 0.2 −15.8 −0.65 0.02 −1.36 31.4 18.9 1.3 3.18 3.36 0.13
Dealers 8.5 2.4 6.7 3.34 2.00 2.56 3.1 1.6 0.7 1.96 1.49 0.48
Foreigners 67.1 16.2 47.5 3.28 2.97 3.23 17.5 5.6 6.9 3.90 3.75 2.76
Mutual funds 41.0 13.3 27.8 3.01 3.47 2.69 19.0 8.7 8.5 1.92 2.52 1.57
All institutions 103.7 32.0 66.6 3.67 2.71 3.09 71.1 34.8 17.6 4.25 5.16 1.34
Individuals −103.7 −16.4 −95.7 −3.67 −0.28 −1.62 −71.1 −9.7 −57.9 −4.25 −0.35 −1.57
On each day, the dollar profit from trade is calculated as the dollar gain on the buy portfolio (net of any market
gain) less the dollar gain on the sell portfolio (net of any market gain). Portfolios are based on net daily buys
(or sells) of each investor group. Buy and sell portfolios are constructed assuming a holding period of 1, 10,
25, and 140 trading days. The table presents the mean daily dollar profit across all trading days. Test statistics
are calculated using the time series of daily dollar profits. Profits are further partitioned based upon whether the
order underlying the trade was aggressive or passive (see the text for definitions of aggressive and passive).
that defines a firm as large varies from month to month, the average cutoff
during our sample period is $NT 24 billion. In the average month, 72 firms are
defined as large. Having defined large (and small) firms, we construct buy and
sell portfolios based on the trades of large (and small) firms.
The mean daily dollar profits by firm size are presented in Table 5.12 The
qualitative patterns for all trades, passive trades, and aggressive trades are
similar for large firms and small firms. By construction, large firms represent
70% of the total market capitalization. Institutional trading is more concentrated
in large firms (64% of all institutional trades are in large firms) than individual
trading (58%). At horizons of 1, 10, and 25 trading days, roughly half of the
individual losses can be traced to their trading in large stocks. At the longer
12
Adding the profits of small firms and large firms does not precisely equal the profits from all trades in Table 4
because we are missing firm-size data for some stocks (e.g., in the month after an initial public offering).
623
The Review of Financial Studies / v 22 n 2 2009
Table 6
Percentage monthly abnormal returns for various trading groups in Taiwan: 1995–1999
Buys–Sells Buys Sells Buys–Sells Buys–Sells Buys Sells Buys–Sells
All All All Passive Aggressive All All All Passive Aggressive
1 day
Corporations 6.078 2.560 −3.518 11.682 0.560 10.40 7.52 −9.33 16.38 1.25
Dealers 5.515 1.859 −3.656 12.460 1.035 10.64 4.90 −8.76 15.62 2.11
Foreigners 9.455 5.167 −4.288 15.305 5.920 13.45 10.82 −9.46 21.28 8.11
Mutual funds 6.576 2.726 −3.850 12.804 2.796 13.49 7.98 −10.07 21.73 5.84
All institutions 10.969 5.002 −5.968 17.069 4.314 19.92 13.54 −16.62 24.28 9.24
Individuals −10.969 −5.968 5.002 9.046 −14.028 −19.92 −16.62 13.53 12.13 −19.14
10 days
Corporations 2.388 0.776 −1.612 3.941 0.109 5.67 2.35 −4.99 8.47 0.32
Dealers 1.183 0.475 −0.708 3.228 −0.152 4.78 1.52 −2.21 10.06 −0.65
Foreigners 2.288 1.325 −0.963 3.804 1.253 4.45 3.66 −2.45 8.29 2.37
Mutual funds 2.183 1.299 −0.884 4.094 0.986 4.34 3.41 −2.04 9.19 1.95
All institutions 3.269 1.394 −1.875 5.197 0.909 8.93 5.23 −5.94 14.26 2.52
Individuals −3.269 −1.875 1.394 2.996 −4.720 −8.93 −5.94 5.23 8.78 −13.61
25 days
Corporations 1.372 0.271 −1.101 1.905 0.193 4.30 0.88 −3.80 6.04 0.65
Dealers 0.308 0.213 −0.095 1.125 −0.251 1.72 0.70 −0.31 5.26 −1.56
Foreigners 1.599 1.154 −0.445 2.158 1.089 3.18 3.47 −1.11 5.49 2.10
Mutual funds 1.251 0.930 −0.321 2.218 0.731 3.83 2.58 −0.82 7.21 2.23
All institutions 1.914 0.850 −1.064 2.609 0.747 6.47 3.55 −3.59 11.24 2.56
Individuals −1.914 −1.064 0.850 1.153 −2.193 −6.47 −3.59 3.55 4.88 −8.47
140 days
Corporations 0.486 0.183 −0.303 0.521 0.207 3.02 0.80 −1.46 4.14 1.09
Dealers 0.247 0.233 −0.014 0.475 0.074 3.42 0.78 −0.04 3.58 0.96
Foreigners 0.727 0.799 0.072 0.769 0.620 3.15 2.98 0.31 3.18 3.00
Mutual funds 0.512 0.575 0.063 0.748 0.387 3.27 1.66 0.18 5.54 2.33
All institutions 0.757 0.494 −0.263 0.842 0.438 5.77 2.40 −1.12 8.24 3.07
Individuals −0.757 −0.263 0.494 0.296 −0.666 −5.77 −1.12 2.40 2.17 −4.80
A buy (and sell) portfolio is constructed that mimics the daily net purchases (and sales) of each investor group
at holding periods of 1, 10, 25, or 140 trading days. The daily returns on the portfolios are compounded to yield
a monthly return series. Abnormal returns are calculated as the intercept from a time series regression of the
portfolio excess return on the market excess return, a firm-size factor, a value-growth factor, and a momentum
factor (four-factor).
horizon of 140 trading days, approximately 60% of their losses can be traced
to trading in large stocks. Thus, individual investors lose on their trades in both
large and small stocks, though their losses per dollar traded, particularly at
short horizons, are greater for small stocks.
624
Just How Much Do Individual Investors Lose by Trading?
abnormal returns. In general, the monthly abnormal returns decrease with the
holding horizon.13 For example, the abnormal return of the buy-sell portfolio
(Table 6, column 1) for all trades shrinks from 10.97% per month at one
trading day (t = 19.92) to 0.76% per month at 140 trading days (t = 5.77).
The abnormal return results are qualitatively similar to the profit calculations
presented in Table 4. Market-adjusted returns and alphas from a single-factor
model are very similar to the results presented in this table. Thus, style or risk
adjustment has virtually no effect on our results.
3. Economic Significance
One of our main objectives is assessing the economic significance of the losses
incurred by individual investors. In this section, we document that individual
13
Abnormal returns tend to decrease with horizon while profits increase with horizon. This is so because the total
number of positions held in the buy (or sell) portfolio at longer horizons is much greater than the total number of po-
sitions held at shorter horizons, and the ratio of total profits to portfolio value decreases. For example, at a one-day
horizon, the buy portfolio will contain only stocks bought in the last day, while at a one hundred fourty-day hori-
zon the buy portfolio will contain stocks bought over the past 140 trading days (with an average holding period of
70 days if trading is uniformly distributed over time).
14
These test statistics rely on the assumption that daily market-timing profits are serially independent. Though there
is no daily serial dependence for holding periods of 10 and 140 days, there is a modest serial dependence at one
day for a holding period of 25 days. Consequently, test statistics are calculated using a Newey-West adjustment
for serial correlation assuming a lag length of six days (one week).
625
The Review of Financial Studies / v 22 n 2 2009
15
Gross trading losses and market-timing losses over the entire sample period are calculated as mean daily losses
times 1,397 (the number of trading days during our sample period). Mean daily gross trading losses and market-
timing losses are $NT 178.7 and $NT 46.4 million (respectively). Commission costs are the total value of trade
(Table 2) times the commission rate of 0.1425%. Transaction taxes are the total value of sales times the transaction
tax of 0.30%.
16
Individual investors held roughly 60% of all outstanding stock during our sample period. The average market
value of all stock during our sample period was $NT 8.1 trillion (Table 1). Thus, trading losses represent roughly
a daily performance penalty of 0.37 basis points (bps) ($NT 178.7 million daily trading losses divided by the
product of $NT 8.1 trillion times 60%), while commissions, transaction taxes, and market-timing losses cost
investors roughly 0.10 bps, 0.44 bps, and 0.47 bps per day. Annualized, this represents a return shortfall of
3.8 percentage points.
17
Commissions are capped at 0.1425% and the transaction tax is 0.30%. Over our sample period, institutions bought
$NT 12.5 trillion and sold $NT 12.5 trillion of common stock (Table 2). Thus, total commissions and transaction
taxes paid during the sample period were $NT 35.6 and $NT 37.5 billion (respectively). This corresponds to
mean daily commissions and transaction taxes of $NT 25.5 million and $NT 26.9 million.
18
Seasholes (2000) presents evidence consistent with our findings on foreign investors. Using data on cross-border
investments in Korean and Taiwanese stocks, Seasholes (2000) documents that foreigners increase positions
prior to positive earning surprises and decrease investments prior to negative surprises.
626
Just How Much Do Individual Investors Lose by Trading?
Commissions are the cost charged by those who provide investors with access
to secondary markets. Secondary markets, in which investors who already own
securities sell to investors who wish to buy those securities, do not directly raise
investment capital for firms. However, secondary markets provide liquidity,
price discovery, and regulatory oversight, which ensure primary investors of
an opportunity to later sell their investments expeditiously and at a reasonable
price. It is difficult to say what the value of this service is to individual investors.
We can, however, put a price on the service in Taiwan: $NT 216 million a day,
or 1.2 percentage points annually. These fees provide a livelihood to employees
of the exchange and of brokerage firms as well as profits to their shareholders.
Combined trading and market-timing losses constitute a wealth transfer from
individual investors to institutional investors. Institutions are agents. Whether
the principals represented by institutions ultimately enjoy this performance
boost depends on the costs that institutions charge their principals for their
portfolio management services. In our sample, the most profitable group of
institutional investors is foreign investors who garner 46.2% of the trading and
market-timing gross profits of institutional investors. Thus, nearly half of the
wealth transfer from domestic individuals to institutional investors goes to for-
eign institutions. Whether the institutional profits of corporations, dealers, and
domestic mutual funds represent a wealth transfer depends on many factors.
Corporate profits would be arguably enjoyed by corporate shareholders, but
only after the wages paid to those who manage the equity portfolios of cor-
porations. Based on our discussions with dealers, their trading operations are
primarily a combination of proprietary trading and trading for high net worth
individuals.
For domestic equity mutual funds, we can shed some light on whether those
who own mutual funds participate in the trading gains of the funds. Using
data between 1995 and 2005, which contain a record of returns for all domestic
equity funds in Taiwan, we are able to construct a time series of monthly mutual
fund returns weighted by the beginning-of-period total net asset value (TNA)
of funds in each month. These data (from the Securities Investment Trust &
Consulting Association of the ROC) are free of survivorship bias. (Dividend
data from the Taiwan Economic Journal are used to calculate fund returns.)
Thus, the time series of returns represents the return earned by the average dollar
invested in equity mutual funds. To estimate the performance of mutual funds,
we estimate an abnormal return using the four-factor model of Equation (1).
For the 1995–2005 sample period, the abnormal return (four-factor intercept)
is 0.43% per month (t = 1.90); during our sample period (1995–1999), the
four-factor intercept is 0.23% per month (t = 0.78). Thus, consistent with our
evidence that mutual funds profit from trade, the returns of mutual funds are
positive (albeit with marginal statistical significance). The positive net returns
earned by mutual funds are quite remarkable, since the TNA-weighted expenses
of these mutual funds are large—ranging from 2.4% to 3.1% annually from
1997 to 2005. Although individual investors could have easily met or beaten
627
The Review of Financial Studies / v 22 n 2 2009
market rates of return by investing in the average mutual fund, few did so. Less
than 1% of equity held by households was held in the form of mutual funds.
Individual investors pay an exorbitant price for trading actively. Individual
investors could participate in financial markets at low cost by following a simple
buy-and-hold strategy. Even if poorly diversified, the average performance of
individual investors would be materially improved. Alternatively, individual
investors could cheaply diversify and enjoy market rates of returns by investing
in equity mutual funds.
4. Reasons to Trade
Why do individual investors willingly incur such large net trading losses?
There are several reasons why uninformed investors might trade: liquidity
requirements, rebalancing needs, hedging demands, entertainment (or sensation
seeking), and the mistaken belief that they are informed, that is, overconfidence.
Turnover in Taiwan during our sample period is nearly 300% annually and two
to three times that observed in the United States in recent years. It strikes us
as unlikely that the liquidity, rebalancing, and hedging needs of Taiwanese
investors are two to three times those of current U.S. investors or that these
needs warrant a reduction of 3.8 percentage points in the return on the aggregate
portfolio of Taiwanese individual investors. We propose, though do not prove,
that a combination of overconfidence and the desire to gamble account for much
of the active trading and substantial losses of individual investors in Taiwan.
Cross-cultural studies of overconfidence report higher levels of
overconfidence—by some measures nearly double—in China and Taiwan com-
pared with the United States (Yates et al., 1989, 1998). Theoretical models of
equity markets predict that overconfident investors will trade to their detriment
(Odean, 1998; Gervais and Odean, 2001; and Caballé and Sákovics, 2003),
while empirical work (Grinblatt and Keloharju, 2006) links overconfidence
and sensation seeking with more active trading. Thus, overconfidence could
contribute to excessive trading in Taiwan.
Another contributing factor may be that Taiwanese investors view trad-
ing in the stock market as an opportunity to gamble (Kumar, 2006) or a
sensation-seeking activity (Grinblatt and Keloharju, 2006). During our sam-
ple period, gambling was illegal in Taiwan. Legalized gambling in the form of
a government-sponsored lottery (the Public Welfare Lottery) was introduced
in January 2002. To shed light on whether some of the excessive trading in
Taiwan is driven by investors who wish to gamble, we estimate the following
regression for the period January 1995 through February 2007:
628
Just How Much Do Individual Investors Lose by Trading?
where TT S E,t is month t percent turnover on the TSE, RTSEt−1 is the month
t − 1 TAIEX index return, TH K ,t and TSG,t are month t percent turnovers on
the Hong Kong and Singapore exchanges, and Lt is an indicator variable set to
0 for months prior to January 2002 and to 1 for January 2002 and subsequent
months.
The estimated coefficient on the lottery dummy variable (β5 ) is −5.62
(t = −3.69), and the mean of monthly TSE turnover from 1995 through 2001
is 22.6%. Thus, controlling for other factors, the introduction of legal gambling
in Taiwan reduced turnover on the TSE by about one-fourth.
To calibrate the reasonableness of this result, we compare lottery losses
to stock market trading losses. Average annual lottery sales in Taiwan
from 2002 through 2006 were $NT 82.3 billion (National Treasury Agency,
Taiwan, http://www.nta.gov.tw/business/roclotto.asp). With a lottery payout
rate of approximately 60% (ROC Lotto, http://www.roclotto.com.tw), lottery
players paid an average net annual cost of about $NT 32.9 billion. In Section 3,
we estimated trading total losses to Taiwanese individual investors from 1995
to 1999 averaging $NT 187 billion per year. If individual investor trading losses
are approximately proportional to the trading activity, a 25% reduction in the
trading activity would correspond to a reduction in annual trading losses of
about $NT 46.75 billion. Thus, the approximate aggregate annual net cost of
playing the lottery ($NT 32.9 billion) was somewhat less than the approximate
aggregate annual reduction in trading losses subsequent to the introduction of
the lottery ($NT 46.75 billion). If, indeed, the Taiwanese derived the same util-
ity of gambling from the lottery that they had previously derived from additional
trading, they did so at a lower cost.
Equity options began trading on the Taiwan Futures Exchange (TAIFEX)
in January 2003; index options began trading in December 2001. Individual
investors account for the majority of trading in equity options. However, the
total volume of trading in options is small relative to trading in common stocks.
For example, in 2006 the total dollar value of trading in common stocks was
nearly $NT 25 trillion (similar to trading levels during our sample period),
while trading in equity options was only 1.2% of this total amount (almost $NT
300 billion). When we augment the above regression to include the dollar vol-
ume of options trading scaled by the market capitalization of Taiwan common
stocks, the coefficient on options trading variable is negative, but not reliably
so (−11.9, t = −0.84), while the coefficient on the lottery dummy remains
reliably negative (−4.6, t = −2.41).
Individual ownership of stock dropped from the late 1990s (when individual
ownership averaged between 56% and 59% of stock) to 2006 (when individual
ownership of stock was 42%). This reduced ownership of stock by individuals,
who have higher turnover rates than institutions during our sample period, may
also explain the drop in turnover in recent years. Unfortunately, we do not
have individual ownership data by month and so are unable to test reliably
629
The Review of Financial Studies / v 22 n 2 2009
the relation between the individual ownership and the overall turnover in the
monthly regression framework.
5. Conclusion
We estimate that Taiwanese individual investors incur trading losses, trading
costs, and market-timing losses that reduce their aggregate portfolio return
by 3.8 percentage points annually. Less comprehensive studies suggest that
trading losses and costs for individual investors in the United States are about
2 percentage points a year (Barber and Odean, 2000, 2001). (U.S. individual in-
vestors trade less actively, but run a higher risk of trading with better-informed
institutional investors.) Countries around the world are increasingly counting
on personal investment accounts to fund their citizens’ retirements. Yet most
individuals have no training in investments; many hold underdiversified portfo-
lios and routinely make poor trading decisions. Over a savings horizon of 20 or
more years, an annual return shortfall of 2 to 3.8 percentage points will result
in a tremendous reduction in potential wealth. In Taiwan, the United States,
and elsewhere, investors who are saving to meet longterm goals would benefit
from effective guidance regarding best investment practices. Until then, the
answer to “Just how much do individual investors lose by trading?” remains:
Too much!
References
Ackermann, C., R. McEnally, and D. Ravenscraft. 1999. The Performance of Hedge Funds: Risk, Return, and
Incentives. Journal of Finance 54:833–74.
Agrawal, V., and N. Naik. 2000. On Taking the Alternative Route: The Risks, Rewards, and Performance
Persistence of Hedge Funds. Journal of Alternative Investments 2:6–23.
Amin, G., and H. Kat. 2003. Hedge Fund Performance 1990–2000: Do the ‘Money Machines’ Really Add Value?
Journal of Financial and Quantitative Analysis 38:251–74.
Barber, B., Y. Lee, J. Liu, and T. Odean. 2004. Do Individual Day Traders Make Money? Evidence from Taiwan.
Working paper, University of California.
Barber, B., Y. Lee, J. Liu, and T. Odean. 2007. Is the Aggregate Investor Reluctant to Realize Losses? European
Financial Management 13:423–47.
Barber, B., and T. Odean. 2000. Trading Is Hazardous to Your Wealth: The Common Stock Investment Perfor-
mance of Individual Investors. Journal of Finance 55:773–806.
Barber, B., and T. Odean. 2001. Boys will Be Boys: Gender, Overconfidence, and Common Stock Investment.
Quarterly Journal of Economics 116:261–92.
Bartov, E., S. Radhakrishnan, and I. Krinsky. 2000. Investor Sophistication and Patterns in Stock Returns After
Earnings Announcements. Accounting Review 75:43–63.
Brown, S., W. Goetzmann, and R. Ibbotson. 1999. Offshore Hedge Funds: Survival and Performance, 1989–95.
Journal of Business 72:91–117.
Caballé, J., and J. Sákovics. 2003. Speculating Against an Overconfident Market. Journal of Financial Markets
6:199–225.
630
Just How Much Do Individual Investors Lose by Trading?
Chakravarty, S. 2001. Stealth-Trading: Which Traders Trades Move Stock Prices? Journal of Financial Economics
61:289–307.
Chan, H., N. Jegadeesh, and R. Wermers. 2000. The Value of Active Mutual Fund Management: An Examination
of the Stockholdings and Trades of Fund Managers. Journal of Financial and Quantitative Analysis 35:343–68.
Christopherson, J., W. Ferson, and D. Glassman. 1998. Conditional Measures of Performance and Persistence
for Pension Funds, in Research in Finance, Vol. 16. Stamford, CT: JAI Press, 1–46.
Coggin, T., F. Fabozzi, and S. Rahman. 1993. The Investment Performance of U.S. Equity Pension Fund
Managers: An Empirical Investigation. Journal of Finance 48:1039–55.
Coggin, T., and C. Trzcinka. 2000. A Panel Study of U.S. Equity Pension Fund Manager Style Performance.
Journal of Investing 9:6–12.
Coval, J., D. Hirshleifer, and T. Shumway. 2005. Can Individual Investors Beat the Market? Available at SSRN:
http://ssrn.com/abstract=364000.
Coval, J., and T. Moskowitz. 2001. The Geography of Investment: Informed Trading and Asset Prices. Journal
of Political Economy 109:811–41.
Daniel, K., M. Grinblatt, S. Titman, and R. Wermers. 1997. Measuring Mutual Fund Performance with
Characteristic-Based Benchmarks.” Journal of Finance 52:1035–58.
Delguercio, D., and P. Tkac. 2002. The Determinants of the Flow of Funds of Managed Portfolios: Mutual Funds
vs. Pension Funds. Journal of Financial and Quantitative Analysis 37:523–57.
Fama, E., and K. French. 1993. Common Risk Factors in Returns on Stocks and Bonds. Journal of Financial
Economics 33:3–56.
Ferson, W., and K. Khang. 2002. Conditional Performance Measurement Using Portfolio Weights: Evidence for
Pension Funds. Journal of Financial Economics 65:249–82.
Foucault, T. 1999. Order Flow Composition and Trading Costs in a Dynamic Limit Order Market. Journal of
Financial Markets 2:99–134.
Gao, S. 2002. China Stock Market in a Global Perspective. Dow Jones Indexes.
Gervais, S., R. Kaniel, and D. Mingelgrin. 2001. The High-Volume Return Premium. Journal of Finance 56:877–
922.
Gervais, S., and T. Odean. 2001. Learning to Be Overconfident. Review of Financial Studies 14:1–27.
Goetzmann, W., and A. Kumar. Equity Portfolio Diversification. Review in Finance (forthcoming).
Griffiths, M., B. Smith, A. Turnbull, and R. White. 2000. The Costs and Determinants of Order Aggressiveness.
Journal of Financial Economics 56:65–88.
Grinblatt, M., and M. Keloharju. 2000. The Investment Behavior and Performance of Various Investor Types: A
Study of Finland’s Unique Data Set. Journal of Financial Economics 55:43–68.
Grinblatt, M., and M. Keloharju. 2006. Sensation Seeking, Overconfidence, and Trading Activity. Working Paper
12223, NBER.
Grinblatt, M., and S. Titman. 1989. Mutual Fund Performance: An Analysis of Quarterly Portfolio Holdings.
Journal of Business 62:393–416.
Grinblatt, M., and S. Titman. 1993. Performance Measurement Without Benchmarks: An Examination of Mutual
Fund Returns. Journal of Business 66:47–68.
Handa, P., R. Schwartz, and A. Tiwari. 2003. Quote Setting and Price Formation in an Order Driven Market.
Journal of Financial Markets 6:461–89.
Ikenberry, D., R. Shockley, and K. Womack. 1998. Why Active Fund Managers Often Underperform the S&P
500: The Impact of Size and Skewness. Journal of Private Portfolio Management 1:13–26.
631
The Review of Financial Studies / v 22 n 2 2009
Ivkovich, Z., C. Sialm, and S. Weisbenner. Portfolio Concentration and the Performance of Individual Investors.
Journal of Financial and Quantitative Analysis (forthcoming).
Ivkovich, Z., and S. Weisbenner. 2004. Local Does as Local Is: Information Content of the Geography of
Individual Investors’ Common Stock Investments. Journal of Finance 60:267–306.
Kumar, A. 2006. Who Gambles in the Stock Market? AFA 2006 Boston Meetings Paper. Available at SSRN:
http://ssrn.com/abstract = 686022.
Lakonishok, J., A. Shleifer, and R. Vishny. 1992. The Structure and Performance of the Money Management
Industry. Brookings Papers on Economic Activity: Microeconomics 1992, 330–91.
La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishny. 1997. Legal Determinants of External Finance.
Journal of Finance 52:1131–50.
Lee, C., A. Shleifer, and R. Thaler. 1991. Investor Sentiment and the Closed-End Fund Puzzle. Journal of Finance
46:75–109.
Liang, B. 1999. On the Performance of Hedge Funds. Financial Analysts Journal 55:72–85.
Linnainmaa, J. 2003b. Who Makes the Limit Order Book? Implications for Contrarian Strategies, Attention-
Grabbing Hypothesis, and the Disposition Effect. Available at SSRN: http://ssrn.com/abstract=474222.
Lyon, J., B. Barber, and C. Tsai. 1999. Improved Methods for Tests of Long-Run Abnormal Stock Returns.
Journal of Finance 54:165–201.
Mitchell, M., and E. Stafford. 2000. Managerial Decisions and Long-Term Stock Price Performance. Journal of
Business 73:287–329.
Odean, T. 1998. Volume, Volatility, Price, and Profit When All Traders Are Above Average. Journal of Finance
53:1887–934.
Odean, T. 1999. Do Investors Trade Too Much? American Economic Review 89:1279–98.
Parlour, C. 1998. Price Dynamics in Limit Order Markets. Review of Financial Studies 11:789–816.
Polkovnichenko, V. 2005. Household Portfolio Diversification: A Case for Rank-Dependent Preference. Review
of Financial Studies 18:1467–502.
Poteshman, A., and V. Serbin. 2003. Clearly Irrational Financial Market Behavior: Evidence from the Early
Exercise of Exchange Trade Stock Options. Journal of Finance 58:37–70.
Schlarbaum, G., W. Lewellen, and R. Lease. 1978a. The Common-Stock-Portfolio Performance Record of
Individual Investors: 1964–70. Journal of Finance 33:429–41.
Schlarbaum, G., W. Lewellen, and R. Lease. 1978b. Realized Returns on Common Stock Investments: The
Experience of Individual Investors. Journal of Business 51:299–325.
Seasholes, M. 2000. Smart Foreign Traders in Emerging Markets. Unpublished Working Paper, University of
California.
Sias, R., and L. Starks. 1997. Return Autocorrelation and Institutional Investors. Journal of Financial Economics
46:103–31.
Wermers, R. 2000. Mutual Fund Performance: An Empirical Decomposition into Stock-Picking Talent, Style,
Transactions Costs, and Expenses. Journal of Finance 55:1655–94.
Yates, J., Y. Zhu, D. Ronis, D. Wang, H. Shinotsuka, and M. Toda. 1989. Probability Judgment Accuracy: China,
Japan, and the United States. Organizational Behavior and Human Decision Processes 43:145–71.
Yates, J., J. Lee, H. Shinotsuka, A. Patalano, and W. Sieck. 1998. Cross-Cultural Variations in Probability Judg-
ment Accuracy: Beyond General Knowledge Overconfidence. Organizational Behavior and Human Decision
Processes 74:89–117.
632