In its 20 years of operation, the Online Trading Academy(OTA) has offered financial education to over 80,000 individuals. Recently the company launched a program known as the Online Trading Academy Research Centre. The primary goal of the OTA Research Center was to diversify sources of research that people could assess for themselves.
The Online Trading Academy noticed that popular research “The Behavior of Individual Investors” conducted by Brad Barber and Terrence Odean suggested that retail traders and investors usually lose money. While another study, “Other People’s Money” by Professor Peter Swan, suggested otherwise, this one concluded that institutional traders and investors typically lose more money than retail investors. The studies used different research methodologies. In a bid to understand this research gap, Mike Richardson, OTA’s president, reached out to Professor Swan to understand his research methodology better.
Professor Swan used the Holding-Period-Invariant methodology to conduct his research, which he believed would eliminate the biases associated with the Calendar-Time method. Contrary to the results obtained earlier using the Calendar-Time methodology, Swan’s methodology indicated that retail traders performed way better than institutional traders.
According to Online Trading Academy, the Calendar-Time research methodology misinterprets how investors think and behave. The research methodology suggests that investors target gains over a pre-specified timeframe. However, this is not the case. The decision by an investor on whether to dump, retain or buy more investment depends on factors such as:
- The investment’s purchase and sale cost
- The potential gains the investor can obtain from alternative investments.
- The current and potential gains the investor can get from the investment already made.
According to professor Swan’s research, knowledgeable retail traders and investors tend to avoid the publicity associated with rising prices advocated by trend-following institutional traders. Mike Richardson remarked that Professor Swan’s research methodology aligns with OTA’s experience on how investors act and think. Read more: https://qnetscamindia.medium.com/