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Uninformative Feedback and Risk Taking: Evidence from Retail Forex Trading

NBER Working Paper No. w22146
2016
  • 3
    Citations
  • 1,454
    Usage
  • 1
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    3
    • Citation Indexes
      3
  • Usage
    1,454
    • Abstract Views
      1,348
    • Downloads
      106
  • Captures
    1
    • Readers
      1
      • SSRN
        1
  • Ratings
    • Download Rank
      516,542

Paper Description

We document evidence consistent with retail day traders in the Forex market attributing random success to their own skill and, as a consequence, increasing risk taking. Although past performance does not predict future success for these traders, traders increase trade sizes, trade size variability, and number of trades with gains, and less with losses. There is a large discontinuity in all of these trading variables around zero past week returns: e.g., traders increase their trade size dramatically following winning weeks, relative to losing weeks. The effects are stronger for novice traders, consistent with more intense “learning” in early trading periods.

Bibliographic Details

Itzhak Ben-David; Justin Birru; Viktor Prokopenya

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