Young investors more likely to reduce stock returns
Young and male stock market investors have a tendency to trade more frequently and therefore are more prone to reducing their returns, according to a joint investigation carried out by the RMIT University and the University of Cape Town.
The researchers, who investigated the characteristics of frequent trading investors, stressed that every time shares were traded, investors incurred transaction costs which in consequence would reduce the returns.
Gizelle Willows from the University of Cape Town said: “These findings are important because they show that to reduce trading frequency, only a few investors need to be targeted and that such efforts should start with male, young and stop loss-using investors”.
“Half of the trading was initiated by only 10 per cent of investors, who traded about 69 times a year or more than five times a month.”
The study also found that the use of internet increased trading activity and that phoning a call centre to trade was also related to trading frequently.
According to the researchers, curbing trading frequency should remain a priority for investors and policy-makers.
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