The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Search results: 6.
Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00226
Brad M. Barber, Terrance Odean
Individual investors who hold common stocks directly pay a tremendous performance penalty for active trading. Of 66,465 households with accounts at a large discount broker during 1991 to 1996, those that trade most earn an annual return of 11.4 percent, while the market returns 17.9 percent. The average household earns an annual return of 16.4 percent, tilts its common stock investment toward high‐beta, small, value stocks, and turns over 75 percent of its portfolio annually. Overconfidence can explain high trading levels and the resulting poor performance of individual investors. Our central message is that trading is hazardous to your wealth.
Book Reviews
Published: 03/31/2007 | DOI: 10.1111/1540-6261.00091
David L. Ikenberry, Brad M. Barber
Zvi Bodie and Robert C. Merton, Finance.
Attention‐Induced Trading and Returns: Evidence from Robinhood Users
Published: 09/30/2022 | DOI: 10.1111/jofi.13183
BRAD M. BARBER, XING HUANG, TERRANCE ODEAN, CHRISTOPHER SCHWARZ
We study the influence of financial innovation by fintech brokerages on individual investors’ trading and stock prices. Using data from Robinhood, we find that Robinhood investors engage in more attention‐induced trading than other retail investors. For example, Robinhood outages disproportionately reduce trading in high‐attention stocks. While this evidence is consistent with Robinhood attracting relatively inexperienced investors, we show that it is also driven in part by the app's unique features. Consistent with models of attention‐induced trading, intense buying by Robinhood users forecasts negative returns. Average 20‐day abnormal returns are −4.7% for the top stocks purchased each day.
Improved Methods for Tests of Long‐Run Abnormal Stock Returns
Published: 05/06/2003 | DOI: 10.1111/0022-1082.00101
John D. Lyon, Brad M. Barber, Chih‐Ling Tsai
We analyze tests for long‐run abnormal returns and document that two approaches yield well‐specified test statistics in random samples. The first uses a traditional event study framework and buy‐and‐hold abnormal returns calculated using carefully constructed reference portfolios. Inference is based on either a skewness‐adjusted t‐statistic or the empirically generated distribution of long‐run abnormal returns. The second approach is based on calculation of mean monthly abnormal returns using calendar‐time portfolios and a time‐series t‐statistic. Though both approaches perform well in random samples, misspecification in nonrandom samples is pervasive. Thus, analysis of long‐run abnormal returns is treacherous.
A (Sub)penny for Your Thoughts: Tracking Retail Investor Activity in TAQ
Published: 05/03/2024 | DOI: 10.1111/jofi.13334
BRAD M. BARBER, XING HUANG, PHILIPPE JORION, TERRANCE ODEAN, CHRISTOPHER SCHWARZ
We placed 85,000 retail trades in six retail brokerage accounts from December 2021 to June 2022 to validate the Boehmer et al. algorithm, which uses subpenny trade prices to identify and sign retail trades. The algorithm identifies 35% of our trades as retail, incorrectly signs 28% of identified trades, and yields uninformative order imbalance measures for 30% of stocks. We modify the algorithm by signing trades using the quoted spread midpoints. The quote midpoint method does not affect identification rates but reduces the signing error rates to 5% and provides informative order imbalance measures for all stocks.
What Explains Differences in Finance Research Productivity during the Pandemic?
Published: 04/13/2021 | DOI: 10.1111/jofi.13028
BRAD M. BARBER, WEI JIANG, ADAIR MORSE, MANJU PURI, HEATHER TOOKES, INGRID M. WERNER
Based on a survey of American Finance Association members, we analyze how demographics, time allocation, production mechanisms, and institutional factors affect research production during the pandemic. Consistent with the literature, research productivity falls more for women and faculty with young children. Independently, and novel, extra time spent on teaching (much more likely for women) negatively affects research productivity. Also novel, concerns about feedback, isolation, and health have large negative research effects, which disproportionately affect junior faculty and PhD students. Finally, faculty who express greater concerns about employers’ finances report larger negative research effects and more concerns about feedback, isolation, and health.