Trader performance research

The more “mature” members of the forum may recall that back in 2012 I stared a PhD. Well, I’m finally done!

Just about 2 weeks ago I got the official word from the University of Exeter that the long journey has ended. You may now all call me Dr. Forman. :cool:

As I’ve mentioned before in one or two other posts, my research has been into trader performance . The data is specifically from the forex market. For those who feel a strong desire to read academic research, you can download a copy of my dissertation here.

Here’s the abstract:
Overconfidence and its relationship to investor market participation is well established in the finance literature. The research into investors and social networks is only in its infancy, however. This thesis extends the literature by expanding on both subjects individually, then bringing them together.

Empirical work on individual investors in the existing literature links overconfidence and excess trading, resulting in impaired returns. The preferred activity metric, monthly account turnover, encapsulates two separate elements, though. One is trade frequency. The other is leverage use. Chapter 4 of this thesis theorizes based on the existing literature that in fact trade frequency is not a good measure of overconfidence. It then demonstrates through empirical analysis of a group of individual non-professional foreign exchange traders that leverage is much more suitable to that role.

Chapter 5 turns the focus to social networks, particularly with respect to information transfer. The literature in finance anticipates that network members benefit from their membership. Further, network position (social capital) enhances that benefit. This thesis challenges that expectation with respect to non-professional investors. Findings based on analysis of members of an online retail foreign exchange trader social network indicate that while there may be an educational benefit accruing to unsophisticated members, for more sophisticated ones membership appears to have a negative effect on returns.

One potential explanation for the negative impact of network membership is explored in Chapter 6 in the form of impression management. It is hypothesized that sophisticated investors are influenced in their behaviour by the realization they are being observed, and also the size of their audience. Analysis of foreign exchange traders indicates an increase in leverage use among sophisticated investors as their audience size increases, coinciding with a decline in trade excess returns, making the case for an observation-based rise in overconfidence.[/I]

Dr. Forman… Nice!!

Congratulations!! I just downloaded the file.

So, what are you going to do with all that spare time? :slight_smile:

Dr. Forman!!!

Congratulatons!! You should definitely be awarded the FX-Man status here on BabyPips, for contribution made to forex knowledge!

Great abstract…What will you do next, as Toekan rightly asked?

You did? Brave soul! Or perhaps just in need of a sleep aid. :stuck_out_tongue:

Good question.

Well, for one I’m currently working on turning some of my PhD research in to publishable papers for eventual submission to academic journals. It’s kind of what you do. :smiley:

Beyond that, though, I want to get serious about extending the type of study of trader performance statistics I talked about here and here. Can’t believe those are already 3 years old!

The idea is to finally have some real information on trader performance beyond the usual “90% fail” and what drives it. But in a more usable fashion than the academic stuff.

:smiley: No worries. I have written quite a lot of reports myself for a living and have been an IT-auditor for 12 years. I am sure your report is by far not as boring as some of mine. :wink:

This was awesome i will read this more in details
Thank you Dr forman

Hey, ‘Doctor Forman’ :slight_smile:

How are you, now that it is ‘all over’, so to speak?

Where will you take your research?

I came across this and I am sure that you will have read it,

but I thought that it would be good to share with the rest of the group here:

Here is one of many interesting passapges from this research paper, which

I think applies to a lot of us here, potentially:

Well, it’s never really “all over”. The next play in the academic game is to take stuff from my dissertation and turn it into journal articles for publication. I’m working on doing that now. :22:

As for where I will take my research, what I’ve long wanted to do is to generate something a lot less academic looking at the performance of individual traders. I’ve got the data to do it after all. Just a question of working it into a currently pretty busy schedule. Hopefully I can get cracking on it before too much longer, though!

Great, Rhody!

I imagine that you will want to strike while the iron is hot, and ride on the wave

of renewed enthusiasm that must surely accompany the relief of completing your

doctoral degree!!

I am yet to read your entire paper, I must admit, but I will do when I have more

time :slight_smile:

Hello peeps,

just bumping this up in case you missed Dr. Forman (a.k.a. RhodyTrader)'s

incredible thesis on retail trading!

For those with an interest, I’ve just started a new thread that has a link to the part of my dissertation that looks to explain the retail forex market and its participants here.