Infrequent stock trading
Original: eternity4719 · source details
Original author: eternity4719 · Chinese source: · English adaptation: parveen0029. Translation and grade notes ↗
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Cost and benefit at a glance
- Check the cost Cost ↓
- There are no monetary costs. The real challenge is resisting the urge to trade whenever you see market news.
- Then the source benefit Benefit ↓
- This study analyzed 66,465 household accounts at US discount brokerage firms between 1991 and 1996. The group of investors who traded most often achieved an annualized return of 11…
In plain terms
Among investors who trade most frequently, the average annual return is only 11.4%, while the overall market average for the same period is 17.9%. This gap of over 6 percentage points is almost entirely caused by the transaction fees incurred with each trade. If these fees are excluded, the returns of frequent and infrequent traders end up being quite similar.
This guide's cartoon · show illustration
Enlarge illustrationOriginal illustration with Chinese lettering; the English dialogue is below. Humour is a reading aid, not evidence.
English dialogue
- Hang on. I never agreed to renew!
Cost: what it takes
There are no monetary costs. The real challenge is resisting the urge to trade whenever you see market news.
Benefit: what the source reports
This study analyzed 66,465 household accounts at US discount brokerage firms between 1991 and 1996. The group of investors who traded most often achieved an annualized return of 11.4%, while the overall market average was 17.9%, and the average return for all households was 16.4%. On average, these households turned over 75% of their stock holdings each year, swapping out three quarters of their portfolio annually. The gross returns (before transaction fees) of frequent and infrequent traders differed only slightly, meaning the performance gap is largely driven by trading costs (USA, 1991–1996).
Conditions, limits and disagreements
These data are from the United States in the 1990s. While the commission and stamp duty structures for A-share markets differ, the core principle remains the same: higher trading frequency leads to lower net returns. This information is not intended as investment advice. 〔2014〕 〔2014〕 〔2014〕 〔2014〕 〔2014〕 〔85〕 〔85〕 〔85〕 〔250000000000〕 〔250000000000〕 〔40000000〕 〔150〕 〔5166.35〕 〔0.5〕 〔0.5〕 〔880000000000〕 〔808000000000〕 〔254000000000〕 〔2012〕
Original references
Original bibliographic titles and links are preserved; some titles are in Chinese.
Barber BM, Odean T (2000). Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. The Journal of Finance 55(2):773-806. https://doi.org/10.1111/0022-1082.00226;An L, Lou D, Shi D (2022). Wealth redistribution in bubbles and crashes. Journal of Monetary Economics 126:134-153. https://doi.org/10.1016/j.jmoneco.2022.01.001;同文作者公开的工作论文稿(2021 年 10 月,国内数字按它逐字核对). https://personal.lse.ac.uk/loud/AnLouShi.pdf
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