How do at-risk online stock traders behave in the stock ... · Excessive stock trading has begun to...
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How do at - risk online stock traders behave in the stock market ?
Transcript of How do at-risk online stock traders behave in the stock ... · Excessive stock trading has begun to...
How do at-risk online
stock traders behave in
the stock market?
▪ Links between stock trading and gambling
▪ Continuum of risk from investing to gambling (Arthur, Williams & Delfabbro, 2016)
▪ Halfway on the continuum: speculative trading
▪ Short-term stock market returns are
practically impossible to predict (Barber, Lee, Liu & Odean, 2014; Chordia, Roll & Subrahmanyam, 2005)
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▪ Certain speculative practices may attract gamblers
into the stock market (Arthur, Williams & Delfabbro, 2016)
▪ Day trading
▪ Penny stocks
▪ Short selling
▪ Derivative products
▪ Gambling has been identified as a motive to
practice speculative trading (Bauer, Cosemans &
Eichholtz, 2009; Dorn & Sengmueller, 2009; Kumar, 2009;
Markiewicz & Weber, 2013)
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▪ The advent of the Internet increased the
accessibility of the stock market while offering
interesting incentives to trade (e.g., reduced
transaction time and costs)
➢ A facilitating context for the development of
excessive online stock trading
▪ Individuals who trade online do so more frequently,
more speculatively and less profitably than when they
trade offline (Barber & Odean, 2002)
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▪ Excessive stock trading has begun to be studied as a form of gambling problem in the stock market
▪ Turner (2011): links between the manifestations of gambling disorder and excessive online stock trading (illusions of control, excessive preoccupation, chasing losses)
▪ Granero et al. (2012): report similarities between the psychological/clinical profiles of pathological gamblers, whether in the stock market or not
▪ Grall-Bronnec et al. (2015): excessive traders traded speculatively and felt like experts before incurring losses and seeking treatment
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▪ Many conceptual papers in finance have focused on excessive stock trading and its resemblances with gambling
▪ Studies have also begun to emerge in clinical psychology, but empirical data on excessive stock trading behaviors is still rare
➢ Hence, is it adequate to be considering excessive stock trading as a form of gambling problem in the stock market? Or by doing so, could we be overlooking some specific behaviors that may provide a different insight into its nature as a clinical phenomenon?
The present study:
✓ To explore these [trading and gambling] behaviors in online stock traders
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▪ Telephone interviews to assess:
▪ Online trading behaviors and related psychological
aspects
▪ Professional and academic consequences
▪ Participation in other gambling activities
▪ Problem Gambling Severity Index (PGSI; Ferris & Wynne,
2001) adapted for trading activities (PGSI-Trading)
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▪ Recruitment through a business and finance magazine (Les Affaires) and the emailing list of the Université Laval community (N = 100)
▪ Post hoc grouping based on PGSI-Trading score
▪ No problem (score of 0; n = 49)
▪ Low-risk (scores 1-2; n = 36)
▪ High-risk (scores 3-7 [moderate risk; n = 13] and 8+ [problem gambling; n = 2)
▪ Due to this possible post hoc grouping, the study aim became a comparative one:
✓ To compare trading and gambling behaviors of online stock traders based on excessive trading problem risk as measured by the PGSI-Trading instrument
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9
0
10
20
30
40
50
60
70
80
90
100
No problem Low-risk High-risk
▪ Comparative omnibus tests for non-parametric data
(Kruskal-Wallis H, khi-square of independance; *p
<.05; **p <.01)
▪ Post hoc comparisons with Bonferroni
corrections (p = .0167)
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11
42
,27 47
,49
44
,41
44
,48
44
,74
55
,01
56
,99
47
,61 5
3,3
9
53
,01
56
,56
44
,5
61
,83 67
,27
60
,37
64
,13
54
,77
50
,17
Technicalanalysis
Traded moneyneeded for next
year
Purchasing onmargin/short
selling
Transactionsmore
speculative
Derivativeproducts
Chose titlesbased on
knowledge
No problem Low-risk High-risk
** ** *** *
12
42
,27 47
,49
44
,41
44
,48
44
,74
55
,01
56
,99
47
,61 5
3,3
9
53
,01
56
,56
44
,5
61
,83 67
,27
60
,37
64
,13
54
,77
50
,17
Technicalanalysis
Traded moneyneeded for next
year
Purchasing onmargin/short
selling
Transactionsmore
speculative
Derivativeproducts
Chose titlesbased on
knowledge
No problem Low-risk High-risk
** ** *** *
Sig. differences between groups for speculative trading behaviors
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42
,27 47
,49
44
,41
44
,48
44
,74
55
,01
56
,99
47
,61 5
3,3
9
53
,01
56
,56
44
,5
61
,83 67
,27
60
,37
64
,13
54
,77
50
,17
Technicalanalysis
Traded moneyneeded for next
year
Purchasing onmargin/short
selling
Transactionsmore
speculative
Derivativeproducts
Chose titlesbased on
knowledge
No problem Low-risk High-risk
** ** *** *
No sig. differences = no surprise! Online trading requires knowledge. But could this very knowledge contribute to a
sense of expertise that encourages excessive trading behaviors in more vulnerable individuals?
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20
19
16
12
33
44
67
31
60
57
67
47
Day trading Withdrawals from account Swing trading over a fewdays
Checking marketsovernight
No problem Low-risk High-risk
** * * **
15
20
19
16
12
33
44
67
31
60
57
67
47
Day trading Withdrawals from account Swing trading over a fewdays
Checking marketsovernight
No problem Low-risk High-risk
** * * **
Short-term trading = another speculative practice
16
20
19
16
12
33
44
67
31
60
57
67
47
Day trading Withdrawals from account Swing trading over a fewdays
Checking marketsovernight
No problem Low-risk High-risk
** * * **
At-risk groups withdrew money from their accounts more due to mostly short-term
financial motives (need for cash, desire to finance projects such as a holiday trip)
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20
19
16
12
33
44
67
31
60
57
67
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Day trading Withdrawals from account Swing trading over a fewdays
Checking marketsovernight
No problem Low-risk High-risk
** * * **
Checking markets overnight was related to excessive preoccupation with stock
in excessive traders interviewed by Grall-Bronnec et al. (2015).
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** ** ** ** *
41
,96
44
,26
42
,99
53
,92
45
22
54
,19
49
,04 54
,36
54
,47
54
,72
29
69
,53
70
,67
65
,77
29
,8
58
,33
73
Excitementbefore market
opens
Make moneyquickly
Strongsensations after
transactions
Long terminvestmentobjective
Increased risk-taking after
losses
Perception ofhaving traded
excessively
No problem Low-risk High-risk
**
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** ** ** ** *
41
,96
44
,26
42
,99
53
,92
45
22
54
,19
49
,04 54
,36
54
,47
54
,72
29
69
,53
70
,67
65
,77
29
,8
58
,33
73
Excitementbefore market
opens
Make moneyquickly
Strongsensations after
transactions
Long terminvestmentobjective
Increased risk-taking after
losses
Perception ofhaving traded
excessively
No problem Low-risk High-risk
**
In addition to endorsing speculative trading behaviors, higher-risk traders
also appear to report an emotional/psychological experience
akin to that of problem gamblers.
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65
31
22
18
15
14
12
10
4
61
31
28
19
6 6
9
6 6
53
47
40
33
20
7 7 7
0
Lottery Casino Poker Sportsbetting
Card/boardgames
Skills games VLTs Onlinegambling
Bingo/Kinzo
No problem Low-risk High-risk
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65
31
22
18
15
14
12
10
4
61
31
28
19
6 6
9
6 6
53
47
40
33
20
7 7 7
0
Lottery Casino Poker Sportsbetting
Card/boardgames
Skills games VLTs Onlinegambling
Bingo/Kinzo
No problem Low-risk High-risk
No sig. differences between the three groups: could there be something specific about the stock market
that attracts a particular profile of gamblers?
Perhaps the skill component inherent in the use of knowledge and strategy, along with the perception
of prestige associated with the stock market, are specific structural characteristics that attract
gamblers who seek a socially acceptable gambling activity where they may experience thrill while
simultaneously satisfying a need to feel competent and knowledgeable.
▪ Limitations
▪ Grouping of the moderate and problem trading
groups may have diluted certain results
▪ Non-validated use of the PGSI-Trading measure
▪ Strengths
▪ Custom-designed questionnaires explored a wide
range of behaviors seldom studied up to date in
online traders
▪ Telephone interviews for richer, more nuanced
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▪ Validate the PGSI-Trading instrument
▪ The role of knowledge and illusions of control in
online traders
▪ How do they contribute to overconfidence and ultimately,
to excessive trading behaviors?
▪ Perseverance and rigidity: underlying cognitions?
▪ Which erroneous thoughts lead certain traders to stick to
their unsuccessful strategies rather than developing the
necessary flexibility to trade in the market?
▪ Focus more specifically on speculative traders for the
study of problem gambling
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▪ Arthur, J. N., Williams, R. J., & Delfabbro, P. H. (2016). The conceptual and empirical relationship between gambling, investing and speculation. Journal of Behavioral Addictions, 5, 580-591. doi: 10.1556/2006.5.2016.084.
▪ Barber, B. M. & Odean, T. (2002). Online investors: Do the slow die first? The Review of Financial Studies 15, 455-487. doi: http://dx.doi.org/10.1093/rfs/15.2.455.
▪ Barber, B. M., Lee, Y.-T., Liu, Y.-J., & Odean, T. (2014). The cross-section of speculator skill: Evidence from day trading. Journal of Financial Market, 18, 1-24. doi: http://dx.doi.org/10.1016/j.finmar.2013.05.006.
▪ Bauer, R., Cosemans, M. & Eichholtz, P. (2009). Option trading and individual investor performance. Journal of Banking and Finance, 33, 731-746. doi: 10.1016/j.jbankfin.2008.11.005.
▪ Chordia, T., Roll, R., & Subrahmanyam, A. (2005). Evidence on the speed of convergence to market efficiency. Journal of Financial Economics, 76, 271-292. doi: http://dx.doi.org/10.1016/j.jfineco.2004.06.004.
▪ Dorn, D., & Sengmueller, P. (2009). Trading as entertainment? Management science, 55(4), 591-603. doi: 10.1287/mnsc.1080.0962.
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▪ Ferris, J. & Wynne, H. (2001). The Canadian Problem Gambling Index: Final report. Ottawa, ON: Canadian Centre on Substance Abuse.
▪ Grall-Bronnec, M., Sauvaget, A., Boutin, C., Bulteau, S., Jiménez-Murcia, S., Fernández-Aranda, F., Challet-Bouju, G. & Caillon, J. (2015). Excessive trading, a gambling disorder in its own right? A case study on a French disordered gamblers cohort. Addictive Behaviors, 64, 340-348. doi: http://dx.doi.org/10.1016/j.addbeh.2015.12.006.
▪ Granero, R., Tárrega, S., Fernández-Aranda, F., Aymamí, N., Gómez-Peña, M., Moragas, L., Custal, N., Orekhova, L., Savvidou, L. G., Menchón, J. M. & Jiménez-Murcia, S. (2012). Gambling on the stock market: an unexplored issue. Comprehensive Psychiatry, 53, 666-673. doi: 10.1016/j.comppsych.2011.12.004.
▪ Kumar, A. (2009). Who gambles in the stock market? Journal of Finance, 64, 1889-1933. doi: 10.1111/j.1540-6261.2009.01483.x.
▪ Markiewicz, L. & Weber, E. U. (2013). DOSPERT's gambling risk-taking propensity scale predicts excessive stock trading. Journal of Behavioral Finance, 14(1), 65-78. doi: 10.1080/15427560.2013.762000.
▪ Turner, N. E. (2011). The addictiveness of online brokerage services: A first person account. Journal of Gambling Issues, 25, 113-129. doi: 10.4309/jgi.2011.25.9.
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Melanie Dixon completed her Ph.D. in clinical psychology at Université
Laval (Québec City, Canada) in 2018. Her thesis comprises two studies that
explored excessive online stock trading behaviors and their links with
problem gambling. Her experience in the field of addiction covers both the
empirical and clinical domains as her full-time residency was completed at
an addiction treatment center.
The first of her two studies was recently published in the Journal of
Gambling Issues. Her paper was awarded the journal’s 2nd Scholar’s Award
for Research Excellence in Problem Gambling (Dixon, M. R., Giroux, I.,
Jacques, C., & Grégoire, P. (2018). What characterizes excessive online
stock trading? A qualitative study. Journal of Gambling Issues, 38, 8-26.
doi: http://dx.doi.org/10.4309/jgi.2018.38.2)
She plans to devote the majority of her time to her practice as a
psychologist while remaining active in research on addiction.
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Dr. Melanie Dixon, Ph.D.
+1.581.748.7488
Centre québécois d’excellence pour la prévention et le
traitement du jeu (CQEPTJ) de l’Université Laval
https://gambling.psy.ulaval.ca
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