"Can Individual Investors Beat the Market?" BY: JOSHUA D. COVAL Harvard University Finance DAVID A. HIRSHLEIFER Ohio State University Fisher College of Business TYLER G. SHUMWAY University of Michigan Document: Available from the SSRN Electronic Paper Collection: http://papers.ssrn.com/paper.taf?abstract_id=364000 Other Electronic Document Delivery: http://www.ssrn.com/link/HBS-NOM-Unit.html SSRN only offers technical support for papers downloaded from the SSRN Electronic Paper Collection location. When URLs wrap, you must copy and paste them into your browser eliminating all spaces. Paper ID: Harvard NOM Working Paper No. 02-45 Date: December 2002 Contact: TYLER G. SHUMWAY Email: Mailto:firstname.lastname@example.org Postal: University of Michigan Business School 701 Tappan Street Ann Arbor, MI 48109 UNITED STATES Phone: 734-763-4129 Fax: 734-936-8716 Co-Auth: JOSHUA D. COVAL Email: Mailto:email@example.com Postal: Harvard University Finance Boston, MA 02163 UNITED STATES Co-Auth: DAVID A. HIRSHLEIFER Email: Mailto:firstname.lastname@example.org Postal: Ohio State University Fisher College of Business 700 Fisher Hall 2100 Neil Avenue Columbus, OH 43210-1144 UNITED STATES ABSTRACT: We document strong persistence in the performance of trades of individual investors. Investors classified in the top 10 percent place other trades that on average earn excess returns of 15 basis points per day. A rolling-forward strategy of going long firms purchased by previously successful investors and shorting firms purchased by previously unsuccessful investors results in excess returns of 5 basis points per day. These returns are not confined to small stocks nor to stocks in which the investors are likely to have inside information. Our results suggest that skillful individual investors exploit market inefficiencies to earn abnormal profits, above and beyond any profits available from well-known strategies based upon size, value, or momentum.