GOETZMANN, W.N., Z. IVKOVIC and K.G. ROUWENHORST, 2001. Day Trading International Mutual Funds: Evidence and Policy Solutions. JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS. [Cited by 35] (7.37/year)
Abstract: "Daily pricing of mutual funds provides liquidity to investors but is subject to valuation errors due to the inability to observe synchronous, fair security prices at the end of the trading day. This may hurt fund investors if speculators strategically seek to exploit mispricing or if the net flow of money into funds is correlated with these pricing errors. We show that mutual funds are exposed to speculative traders by using a simple day trading rule that yields large profits in a sample of 391 U.S.-based open-end international mutual funds. We propose a simple "fair pricing" mechanism that alleviates these concerns by correcting net asset values for stale prices. We argue that fund companies and regulators should look at alternatives that allow funds to offer fair pricing to investors, which in turn decreases the need to resort to monitoring for day traders and redemption penalties."
LILJEBLOM, E., A. LöFLUND and K. HEDVALL, 2001. Foreign and domestic investors and tax induced ex-dividend day trading. Journal of Banking and Finance. [Cited by 9] (1.89/year)
Abstract: "This paper reports evidence on the consequences of differential tax treatment for domestic and foreign owners in a market with a high degree of foreign ownership for certain stocks, the Helsinki Stock Exchange (HSE). We find that ex-dividend day ratios vary with the degree of foreign ownership, and detect significantly abnormal ex-dividend day trading volumes. The average ex-dividend price drops for high-yield, high-foreign ownership stocks are likely to lie outside no-arbitrage boundaries for domestic taxable investors. An investigation of short selling through a derivatives instrument also reveals significant excess trading volumes in ex-dividend months. The tax heterogeneity of the company's ownership structure seems to play a role in explaining deviations from dividend neutrality, more deviations are observed for companies with a more homogeneous ownership structure in terms of taxation."
BARBER, Brad M., et al., 2005. Do Individual Day Traders Make Money? Evidence from Taiwan. [Cited by 8] (4.57/year)
Abstract: "When an investor buys and sells the same stock on the same day, he has made a day trade. We analyze the performance of day traders in Taiwan. Day trading by individual investors is prevalent in Taiwan – accounting for over 20 percent of total volume from 1995 through 1999. Individual investors account for over 97 percent of all day trading activity. Day trading is extremely concentrated. About one percent of individual investors account for half of day trading and one fourth of total trading by individual investors. Heavy day traders earn gross profits, but their profits are not sufficient to cover transaction costs. Moreover, in the typical six month period, more than eight out of ten day traders lose money. Despite these bleak findings, there is strong evidence of persistent ability for a relatively small group of day traders. Traders with strong past performance continue to earn strong returns. The stocks they buy outperform those they sell by 62 basis points per day. This spread is sufficiently large to cover transaction costs."
ARAK, M. and R.E. COOK, 1997. Do Daily Price Limits Act as Magnets? The Case of Treasury Bond Futures. Journal of Financial Services Research. [Cited by 14] (1.60/year)
Abstract: "This article examines price behavior in the U.S. Treasury bond futures market in the mornings after large overnight price moves, using data from 1980 to 1987. The article tests whether price behavior is affected by proximity to a price limit, and whether the effect is a magnet effect or a calming effect. In that period, the price tends to reverse direction after the morning open, and the reversal appears to reflect a calming effect of the price being close to the limit. An alternative hypothesis—that morning price behavior reflects the overnight price change rather than proximity to the price limit per se—is also tested, and does not perform as well in explaining price behavior."
JORDAN, Douglas J. and J. David DILTZ, 2003. The Profitability of Day Traders. Financial Analysts Journal, November/December 2003, Vol. 59, No. 6: pp. 85-94. [Cited by 3] (1.09/year)
Abstract: "We used two distinct methodologies to examine the profitability of a sample of U.S. day traders. The results show that about twice as many day traders lose money as make money. Approximately 20 percent of sample day traders were more than marginally profitable. We found evidence that day-trader profitability is related to movements in the Nasdaq Composite Index."
HARRIS, Jeffrey H. and Paul H. SCHULTZ, 1998. The trading profits of SOES bandits. Journal of Financial Economics, Volume 50, Issue 1, 1 October 1998, Pages 39-62. [Cited by 36] (4.31/year)
Abstract: "SOES bandits are individual investors who use Nasdaq’s Small Order Execution System (SOES) for day trading. Their average profit per trade is small, but they trade dozens or hundreds of times per week. Bandits usually establish a position before most market-makers have updated their quotes, and lay off the position at favorable prices through Instinet or SelectNet. It is noteworthy that they trade profitably with market-makers despite having less information. Bandits keep the profits and bear the losses from their trades. Thus they have greater incentives to trade well than the employees of market-making firms."
SHELLENBERGER, D., et al., 1999. Report of the Day Trading Project Group. Publication of the North American Securities Administrators …. [Cited by 1] (0.14/year)
The analyst concluded that, based on the study of accounts, “70% of public traders will not only
lose, but will almost certainly lose everything they invest.” He also concluded that only 11.5% of
the accounts reviewed evidenced the ability to conduct profitable short-term trading.
GARVEY, Ryan and Anthony MURPHY, 2005. The Profitability of Active Stock Traders. Journal of Applied Finance, Vol. 15, No. 2, Fall/Winter 2005, pp. 93-100. [not cited] (0/year)
Active stock traders, or day traders, who may account for a sizable proportion of US trading volume, hold stocks for only hours or even minutes. Examination of their trading profits reveals that about half of the 1,386 day traders in this study were profitable after paying commissions. Both profitable and unprofitable traders have very similar trading characteristics; they concentrate their trading at much the same time, on the same stocks, and in the same trading locations. Yet the skilled or lucky traders generate $9.5 million in net intraday profits, and the unskilled or unlucky lost $4.6 million in the same three-month sample period.
LINNAINMAA, Juhani, 2005. The individual day trader, The Anderson School at UCLA. [Cited by 1] (1.18/year)
Abstract: "This paper shows that individual day traders are reluctant to close losing day trades. They even sell other stocks from their portfolios to finance the unintended purchases. This disposition to ride losers has significant long-term welfare consequences. Day traders hurt their portfolios’ performance up to -6% in three months after a holdings change. The changes in individuals’ exposure to market-wide shocks cause this underperformance: individuals systematically migrate towards small technology stocks with low B/M ratios. We find a negative relation between day trading profits and long-term performance: active day traders have the highest day trading profits but they hurt their long-term performance the most. Our results suggest that behavioral biases can push investors towards portfolios they might feel uncomfortable holding under other circumstances."
"Mark Orrin Barton (1955 - July 29, 1999) was a spree killer from Stockbridge, Georgia, who, on July 29, 1999, shot and killed nine people and injured 13 more. The shootings occurred at two Atlanta day trading firms -- Momentum Securities and the All-Tech Investment Group. It is believed that Barton, a daytrader, was motivated by $105,000 USD in losses over the previous two months. Barton committed suicide four hours later at an Acworth gas station, having been spotted by the police. He was ordered to stop at a gas station, but shot himself before the police could reach him."
Wiki
In 1999 Mark Barton, a daytrader who had lost $105,000, shot and killed nine people at two day trading firms in Atlanta, US. Barton committed suicide hours later.
http://home.cc.umanitoba.ca/~umpaize0/daytrade.html
"In one brokerage firm he did not identify, Levitt said 67 out of 68 day traders had lost money."
The NASAA hired an independent analyst to study a representative sample of day trading accounts. In one case, regulators learned that in a day trading office in Massachussets, 67 of 68 accounts had lost money. Further "only one of the customers successfully day traded, and this account did not realize returns commensurate with the risks."
http://www.nasaa.org/Issues___Answers/Legislative_Activity/Testimony/751.cfm
Aaron Lynch
"Another transmissivity effect can be seen in the recent phenomenon of day trading. The great majority of day traders lose money (Shellenberger et al. [1999]). But even when a majority are forced to give it up due to heavy losses, those who happen to win may be more visible and more vocal. Hence, they have more opportunities (and more incentive) to retransmit their ideas about day trading to reporters and potential new customers. Moreover, those engaged in day trading tend to think about their investments very frequently, which might lead them to talk about it more often to friends and family. Those forced out by heavy losses may be too embarrassed to talk about it. Thus, day trading need not be generally lucrative to enjoy episodes of self-sustaining transmissivity."
Thought Contagions in the Stock Market
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