Income, trading, and performance: Evidence from retail investors

Dien Giau Bui; Iftekhar Hasan; Chih-Yung Lin; Rui Xiang Zhai

doi:10.1016/j.jempfin.2022.01.006

Income, trading, and performance: Evidence from retail investors

Dien Giau Bui, Iftekhar Hasan, Chih-Yung Lin^*, Rui Xiang Zhai

^*Corresponding author for this work

Department of Information Management and Finance

Research output: Contribution to journal › Article › peer-review

3 Scopus citations

Abstract

We examine whether household income influences the trading styles of retail investors and their investment performance. To investigate this question, we use a unique dataset of branch-level trading that contains all retail investors and observe that those investors with high income trade more and earn significantly higher returns in the stock market. In addition, this income effect becomes stronger for highly risky stocks, such as gambling or lottery-like stocks. These findings are in line with the information model theorized by Peress (2004) in which wealthy investors take extra risks by trading more stocks.

Original language	English
Pages (from-to)	176-195
Number of pages	20
Journal	Journal of Empirical Finance
Volume	66
DOIs	https://doi.org/10.1016/j.jempfin.2022.01.006
State	Published - Mar 2022

Keywords

Gambling stocks
Household income
Lottery-like stocks
Retail investor
Trading behavior

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10.1016/j.jempfin.2022.01.006

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title = "Income, trading, and performance: Evidence from retail investors",

abstract = "We examine whether household income influences the trading styles of retail investors and their investment performance. To investigate this question, we use a unique dataset of branch-level trading that contains all retail investors and observe that those investors with high income trade more and earn significantly higher returns in the stock market. In addition, this income effect becomes stronger for highly risky stocks, such as gambling or lottery-like stocks. These findings are in line with the information model theorized by Peress (2004) in which wealthy investors take extra risks by trading more stocks.",

keywords = "Gambling stocks, Household income, Lottery-like stocks, Retail investor, Trading behavior",

author = "Bui, {Dien Giau} and Iftekhar Hasan and Chih-Yung Lin and Zhai, {Rui Xiang}",

note = "Publisher Copyright: {\textcopyright} 2022 Elsevier B.V.",

year = "2022",

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doi = "10.1016/j.jempfin.2022.01.006",

language = "English",

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T2 - Evidence from retail investors

AU - Bui, Dien Giau

AU - Hasan, Iftekhar

AU - Lin, Chih-Yung

AU - Zhai, Rui Xiang

PY - 2022/3

Y1 - 2022/3

N2 - We examine whether household income influences the trading styles of retail investors and their investment performance. To investigate this question, we use a unique dataset of branch-level trading that contains all retail investors and observe that those investors with high income trade more and earn significantly higher returns in the stock market. In addition, this income effect becomes stronger for highly risky stocks, such as gambling or lottery-like stocks. These findings are in line with the information model theorized by Peress (2004) in which wealthy investors take extra risks by trading more stocks.

AB - We examine whether household income influences the trading styles of retail investors and their investment performance. To investigate this question, we use a unique dataset of branch-level trading that contains all retail investors and observe that those investors with high income trade more and earn significantly higher returns in the stock market. In addition, this income effect becomes stronger for highly risky stocks, such as gambling or lottery-like stocks. These findings are in line with the information model theorized by Peress (2004) in which wealthy investors take extra risks by trading more stocks.

KW - Gambling stocks

KW - Household income

KW - Lottery-like stocks

KW - Retail investor

KW - Trading behavior

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SN - 0927-5398

VL - 66

SP - 176

EP - 195

JO - Journal of Empirical Finance

JF - Journal of Empirical Finance

ER -

Income, trading, and performance: Evidence from retail investors

Abstract

Keywords

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