Trading Is Hazardous to Your Wealth

Terrance Odean, Brad Barber

Research

34 Pages

The authors examine how trading frequency affects individual investor performance, using brokerage records to test whether active trading adds value. They find that frequent traders substantially lag less active investors after costs, supporting the view that overconfidence can turn increased activity into weaker results.

Key Takeaways

Frequent Trading Hurts: The most active households earned 11.4% annually versus 18.5% for the least active group after trading costs.
Costs Reduce Returns: The average household earned 18.7% before transaction costs but only 16.4% after costs, compared with 17.9% for the market.
Turnover Runs High: The average household turned over more than 75% of its stock portfolio annually, while the most active households exceeded 250%.
VIEW FULL REPORT

Join our newsletter to have all of this content + Exclusive Newsletter Bonus Content delivered to your inbox every week

Related Content

Portfolio Management
A $40 Billion ETF Shuffle Helps Foreign Investors Dodge US Taxes
Sep 2026
Portfolio Management
Public to Private Equity in the United States: A Long-Term Look
Sep 2026
Markets
Europe is finally executing
Sep 2026

The information contained in this communication is of a general nature for informational purposes only, and does not constitute financial, investment, tax or legal advice. The information contained within this communication reflects the opinions of those referenced herein, and do not reflect the opinions of The Idea Farm, L.P. and its affiliates. Such opinions expressed herein are as of the date of production and are subject to change at any time without notice due to various factors, including changing market conditions or tax laws. Where data or information prepared by third parties is presented, no representation, warranty, or undertaking, expressed or implied, is given to the accuracy or completeness of such information by The Idea Farm, L.P. or any other person. While such sources are believed to be reliable, The Idea Farm, L.P. does not assume any responsibility for the accuracy or completeness of such information and does not undertake any obligation to update the information contained herein as of any future date. Any links to third party websites are offered only for use at your own discretion. The Idea Farm L.P., and its affiliates, are separate and unaffiliated from any third parties listed herein and are not responsible for their products, services, policies or the content of their website. All investments are subject to varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy or product referenced directly or indirectly in this communication will be profitable, perform equally to any corresponding indicated historical performance level(s), or be suitable for your portfolio. Past performance is not an indicator of future results.

Scroll to Top