Connect with us

Business

‘Trade as little as possible’: UBC study finds frequent stock trading comes with more risk, fewer rewards

Avatar

Published

on


VANCOUVER – The sudden surge in the price of GameStop shares and other underperforming stocks over the past month has made some people millionaires, but it has plagued many more people with losses.

As the investment forums on Reddit and the growing popularity of commission-free stock trading platforms encourage more people to try and beat the market by choosing the right investments at the right time, new research from the Sauder School of Business of UBC calls for caution.

The study, called “The volatility of returns for equity investors, Builds on previous research that has shown that frequent buying and selling tends to result in lower returns than just buying and holding.

In addition to the tendency of this “time the market” strategy to lead to lower returns, researchers at UBC found that such behavior also increases the volatility of a portfolio.

The study looked at data from the New York Stock Exchange, the US Stock Exchange and the Nasdaq, calculating “dollar-weighted” returns to capture the effects of market volatility over time.

Dollar-weighted returns take into account both the performance of a given stock or portfolio and the timing of investments in it.

For example, if you inject $ 1000 today, it has a very different implication than if you inject $ 1000 two months from today, as market conditions are very different and stock prices are different, said study co-author and assistant professor Dr. Xin Zheng, said in a press release.

Zheng and his co-author, Ilia D. Dichev of Emory University, found significant differences in volatility by examining dollar-weighted returns versus “buy and hold” returns, i.e. simply say the change in the price of a stock over a period of time.

Over a 20-year investment period, the dollar weighted returns showed 50% higher volatility than the buy and hold returns. Over 30 years, the difference was even greater, with dollar-weighted returns 71% more volatile than buy and hold returns.

While this finding highlights the significant risks investors take when buying and selling frequently, it is not only these “active investors” who are affected by the higher volatility.

At the beginning of their article, the researchers ask the reader to consider an investor starting from scratch and regularly adding to an investment portfolio over a 20-year period. If the returns are constant for the first 10 years and then oscillate more sharply in the 10 seconds, the investor will see greater overall volatility over the two decades, because he invested more money during the period. more volatile.

Zheng’s advice to retail investors is to “trade as little as possible.”

“Investors shouldn’t be on the phone all the time,” he said. “They can watch as much as they want, but trading is expensive and this contributes to the overall market volatility, which will affect their own stocks.”



What Are The Main Benefits Of Comparing Car Insurance Quotes Online

LOS ANGELES, CA / ACCESSWIRE / June 24, 2020, / Compare-autoinsurance.Org has launched a new blog post that presents the main benefits of comparing multiple car insurance quotes. For more info and free online quotes, please visit https://compare-autoinsurance.Org/the-advantages-of-comparing-prices-with-car-insurance-quotes-online/ The modern society has numerous technological advantages. One important advantage is the speed at which information is sent and received. With the help of the internet, the shopping habits of many persons have drastically changed. The car insurance industry hasn't remained untouched by these changes. On the internet, drivers can compare insurance prices and find out which sellers have the best offers. View photos The advantages of comparing online car insurance quotes are the following: Online quotes can be obtained from anywhere and at any time. Unlike physical insurance agencies, websites don't have a specific schedule and they are available at any time. Drivers that have busy working schedules, can compare quotes from anywhere and at any time, even at midnight. Multiple choices. Almost all insurance providers, no matter if they are well-known brands or just local insurers, have an online presence. Online quotes will allow policyholders the chance to discover multiple insurance companies and check their prices. Drivers are no longer required to get quotes from just a few known insurance companies. Also, local and regional insurers can provide lower insurance rates for the same services. Accurate insurance estimates. Online quotes can only be accurate if the customers provide accurate and real info about their car models and driving history. Lying about past driving incidents can make the price estimates to be lower, but when dealing with an insurance company lying to them is useless. Usually, insurance companies will do research about a potential customer before granting him coverage. Online quotes can be sorted easily. Although drivers are recommended to not choose a policy just based on its price, drivers can easily sort quotes by insurance price. Using brokerage websites will allow drivers to get quotes from multiple insurers, thus making the comparison faster and easier. For additional info, money-saving tips, and free car insurance quotes, visit https://compare-autoinsurance.Org/ Compare-autoinsurance.Org is an online provider of life, home, health, and auto insurance quotes. This website is unique because it does not simply stick to one kind of insurance provider, but brings the clients the best deals from many different online insurance carriers. In this way, clients have access to offers from multiple carriers all in one place: this website. On this site, customers have access to quotes for insurance plans from various agencies, such as local or nationwide agencies, brand names insurance companies, etc. "Online quotes can easily help drivers obtain better car insurance deals. All they have to do is to complete an online form with accurate and real info, then compare prices", said Russell Rabichev, Marketing Director of Internet Marketing Company. CONTACT: Company Name: Internet Marketing CompanyPerson for contact Name: Gurgu CPhone Number: (818) 359-3898Email: [email protected]: https://compare-autoinsurance.Org/ SOURCE: Compare-autoinsurance.Org View source version on accesswire.Com:https://www.Accesswire.Com/595055/What-Are-The-Main-Benefits-Of-Comparing-Car-Insurance-Quotes-Online View photos



picture credit

ExBUlletin

to request, modification Contact us at Here or [email protected]