Do Day Traders Rationally Learn about Their Ability
The quick answer is no…..
Abstract
We analyze the performance of and learning by individual investors who engage in day trading in Taiwan from 1992 to 2006 and test the proposition that individual investors rationally speculate as day traders in order to learn whether they possess the superior trading ability. Consistent with models of both rational and biased learning, we document that unprofitable day traders are more likely to quit than profitable traders. Inconsistent with models of rational speculation and learning, we document that the aggregate performance of day traders is negative, that the vast majority of day traders are\ unprofitable, and many persist despite an extensive experience of losses, .
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