Munich Personal RePEc Archive

Do Individual Investors Ignore Transaction Costs?

Anginer, Deniz and Han, Xue Snow and Yildizhan, Celim (2017): Do Individual Investors Ignore Transaction Costs?

This is the latest version of this item.


Download (648kB) | Preview


Using close to 800,000 (2,000,000) transactions by 66,000 (303,000) households in the United States (in Finland), we show that individual investors with longer holding periods choose to hold less liquid stocks in their portfolios, consistent with Amihud and Mendelson’s (1986) theory of liquidity clienteles. The relationship between holding periods and transaction costs is stronger amongst more financially sophisticated households. Households whose holding periods are positively related to transaction costs also earn higher gross returns on their investments before accounting for transaction costs, suggesting that attention to non-salient transaction costs is an indication of investing ability. We confirm our findings by analyzing changes to investors’ holding periods around exogenous shocks to stock liquidity.

Available Versions of this Item

Logo of the University Library LMU Munich
MPRA is a RePEc service hosted by
the University Library LMU Munich in Germany.