Department of Finance
Fisher College of Business
The Ohio State University
2100 Neil Avenue
Columbus, OH 43210
NBER Working Papers and Publications
|April 2016||Uninformative Feedback and Risk Taking: Evidence from Retail Forex Trading|
with Itzhak Ben-David, Viktor Prokopenya: w22146
We document evidence consistent with retail day traders in the Forex market attributing random success to their own skill and, as a consequence, increasing risk taking. Although past performance does not predict future success for these traders, traders increase trade sizes, trade size variability, and number of trades with gains, and less with losses. There is a large discontinuity in all of these trading variables around zero past week returns: e.g., traders increase their trade size dramatically following winning weeks, relative to losing weeks. The effects are stronger for novice traders, consistent with more intense “learning” in early trading periods.
|March 2016||Industry Familiarity and Trading: Evidence from the Personal Portfolios of Industry Insiders|
with Itzhak Ben-David, Andrea Rossi: w22115
We study whether industry familiarity is an advantage in stock trading by exploring the trading patterns of industry insiders in their own personal portfolios. To do so, we identify accounts of industry insiders in a large dataset provided by a retail discount broker. We find that insiders trade firms from their own industry more frequently. Furthermore, they earn abnormal returns exclusively when trading own-industry stocks, especially obscure stocks (small, low analyst coverage, high volatility). In a battery of tests, we find no evidence of the use of private information. The results are most consistent with the interpretation that industry familiarity is an advantage in stock trading.