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The cross-section of speculator skill: Evidence from day trading


We document economically large cross-sectional differences in the before- and after-fee returns earned by speculative traders by analyzing day traders in Taiwan from 1992 to 2006. We sort day traders based on their returns in year y and analyze their performance in year y+1; the 500 top-ranked day traders go on to earn daily before-fee (after-fee) returns of 61.3 (37.9) bps per day; bottom-ranked day traders go on to earn daily before-fee (after-fee) returns of -11.5 (-28.9). bps per day. Less than 1% of the day trader population is able to predictably and reliably earn positive abnormal returns net of fees. © 2013 Elsevier B.V.

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