Wei A. Xiong
Shenzhen Stock Exchange
2012 Shennan Blvd.
Institutional Affiliation: Shenzhen Stock Exchange
NBER Working Papers and Publications
|March 2020||Resolving the Excessive Trading Puzzle: An Integrated Approach Based on Surveys and Transactions|
with Hongqi Liu, Cameron Peng, Wei Xiong: w26911
The behavioral finance literature has provided over a dozen explanations for the so-called excessive trading puzzle – retail investors trade a lot even though more trading hurts their performance. It is difficult to use transaction data to differentiate these explanations as they share similar predictions by design. To confront this challenge, we design and administer a nation-wide survey among retail investors to elicit their responses to an exhaustive list of trading motives. By merging survey responses with account-level transaction data, we validate survey responses with actual trading behaviors and compare the power of survey-based and transaction-based measures of trading motives. A horse race among survey-based trading motives suggests that overconfidence in having information advan...