Investor Characteristics and Trading Activity in Different Market Conditions

Using a proprietary dataset comprising of the trading records of individual investors from a UK brokerage firm, we examine whether behavioural bias of individual investors is exacerbated by different market conditions. We find some evidence that investors who are prone to overconfidence trade more frequently following positive market conditions. Recent market volatility also induces more trading by these investors. We find investors who use the financial advisory services at the brokerage firm tend to trade more frequently. However, contrary to our expectations, advice-using investors' responses to market conditions are not different from those who do not use the services