Author : Weiyu Kuo
Publisher :
ISBN 13 :
Total Pages : 87 pages
Book Rating : 4.:/5 (13 download)
Book Synopsis Cognitive Limitation and Investment Performance by : Weiyu Kuo
Download or read book Cognitive Limitation and Investment Performance written by Weiyu Kuo and published by . This book was released on 2014 with total page 87 pages. Available in PDF, EPUB and Kindle. Book excerpt: We hypothesize that cognitive limitation may be manifested in a disproportionately large volume of limit orders submitted at round-number prices if investors use these numbers as cognitive shortcuts. Using detailed limit order data in the Taiwan Futures Exchange, we find that investors with lower cognitive abilities, defined as higher limit order submission ratios at round numbers, suffer greater losses in their round-numbered and non-round-numbered limit orders, market orders, and round-trip trades. The positive correlation between cognitive ability and investment performance is monotonic and robust across futures and options markets. In addition, past trading experience helps to mitigate the cognitive limitation.