Journal of Business Economics

, Volume 87, Issue 5, pp 669–703 | Cite as

Do individual investors learn from their mistakes?

  • Maximilian KoestnerEmail author
  • Benjamin Loos
  • Steffen Meyer
  • Andreas Hackethal
Original Paper


Based on recent empirical evidence which suggests that as investors gain experience, their investment performance improves, we hypothesize that the specific mechanism through which experience translates into better investment returns is closely related to learning from investment mistakes. To test our hypotheses, we use an administrative dataset which covers the trading history of 19,487 individual investors. Our results show that underdiversification and the disposition effect do not decline as investors gain experience. However, we find that experience correlates with less portfolio turnover. We conclude that compared to other investment mistakes, it is relatively easy for individuals to identify and avoid costs related to excessive trading activity. When correlating experience with portfolio returns, we find that as investors gain experience, their portfolio returns improve. A comparison of returns before and after accounting for transaction costs reveals that this effect is related to learning from overtrading.


Investor learning Investment mistakes Household Finance 

JEL Classification

D03 D14 G11 


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Copyright information

© Springer-Verlag Berlin Heidelberg 2017

Authors and Affiliations

  • Maximilian Koestner
    • 1
    Email author
  • Benjamin Loos
    • 2
  • Steffen Meyer
    • 3
  • Andreas Hackethal
    • 4
  1. 1.Retail Banking Competence CenterGoethe University FrankfurtFrankfurt am MainGermany
  2. 2.University of MannheimMannheimGermany
  3. 3.Leibniz Universität HannoverHannoverGermany
  4. 4.Endowed Chair of Personal FinanceGoethe University FrankfurtFrankfurt am MainGermany

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