The Trading Performance of Individual Investors

Based on more than 7 million transactions, we examine the financial performance of 56,723 French individual investors between 1999 and 2006. We show that French investors exhibit negative risk-adjusted returns on their portfolios and would be better off applying a buy and hold strategy. Most skilled investors, from whom we could expect noticeable results, do not perform better. Shortfalls can be explained by investors’ poor stock selection abilities. Indeed, the stocks they buy underperform the stocks they sell. This observation is robust for various market trends.
JEL Codes: G11.
Keywords: Individual Investors; Portfolio Performance; Trading Profitability; Sophistication.