Sunday, June 19, 2005


Academic Paper: Who Gains More by Trading - Individuals or Institutions?

We calculate a proxy for individual trading, and find a significant difference in the return patters of stocks with different proportions of individual and institutional trading activity. These differences indicate that individuals buy low and sell high, and that they realize superior gains by selling. Furthermore, in the late 1990s bubble, they gain about 2% per month more than institutions by buying. Our findings suggest the due to holding winners too long institutions mistime the momentum cycles and gain less than individuals. They do not support the self-evident truth that individuals are the noise traders who lose money by trading.

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