Type: Working Paper
Rationalizing Trading Frequency and Returns
Working Paper, EUI ECO, 2010/25
BONAPARTE, Yosef, COOPER, Russell, Rationalizing Trading Frequency and Returns, EUI ECO, 2010/25 - http://hdl.handle.net/1814/14058
Retrieved from Cadmus, EUI Research Repository
Barber and Odean (2000) study the relationship between trading frequency and returns. They find that households who trade more frequently have a lower net return than other households. But all households have about the same gross return. They argue that these results cannot emerge from a model with rational traders and instead attribute these findings to overconfidence. Using a dynamic optimization approach, we find that neither a model with rational agents facing adjustment costs nor various models of overconfidence fit these facts.
Cadmus permanent link: http://hdl.handle.net/1814/14058
Series/Number: EUI ECO; 2010/25