Account Turnover and Demographic Profiles: Which Investors Trade Too Much?

Recent empirical studies investigating the issue of individual investor trading activity have reported that some individual investors tend to overtrade securities and to earn returns less than the market overall. The present paper uses a fixed effects logit and regression model to analyze a dataset...

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Bibliographic Details
Published inJournal of financial and economic practice Vol. 11; no. 2; p. 48
Main Authors Anderson, Seth C, Stranahan, Harriet
Format Journal Article
LanguageEnglish
Published Peoria Bradley University 01.10.2011
Subjects
Consumers
Demographics
Financial services
Investment policy
Investments
Mutual funds
Professional misconduct
Regression analysis
Securities trading
Stock brokers
Studies
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Summary:Recent empirical studies investigating the issue of individual investor trading activity have reported that some individual investors tend to overtrade securities and to earn returns less than the market overall. The present paper uses a fixed effects logit and regression model to analyze a dataset of 1027 full-service brokerage equity accounts (1998-1999) to provide insights into whether higher trading is more likely to occur in accounts held by members of specific demographic groups. We find that, among all investors, the elderly, minority, and clients with less wealth are the most likely retail brokerage clients to exhibit excessive trading activity. This study may help policymakers to more readily identify clients who have a propensity toward excessive trading in full-service brokerage accounts. [PUBLICATION ABSTRACT]
ISSN:1937-6820