The Correlated Trading and Investment Performance of Individual Investors

We find that individual investors tend to trade in the same direction as other individual investors in the same broker branch. The more pronounced an individual investor's herding behavior, the worse she performs in her investments. One explanation that herding investors underperform is the poor market timing of their trades. We find that limit orders from those who herd more have a longer time-to-execution and time-to-cancellation, indicating that these orders face a fierce competition to execute and tend to become stale after submissions. Finally, we find that individual investors learn from their past experience and herd less in the future