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4 years ago

Overconfident investors trade more in volatile markets, impacting financial stability.

SSRN Electronic Journal
Investor Characteristics and Trading Activity in Different Market Conditions
Daniel W. Richards, Marvin Wee, Joey Yang

Paper Summary

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Individual investors tend to trade more frequently when they are overconfident or when the market is doing well. Market volatility also leads to increased trading activity. Using financial advisory services at a brokerage firm is associated with higher trading frequency. However, investors who use these services do not respond differently to market conditions compared to those who do not use them.