Resolving the excessive trading puzzle: an integrated approach based on surveys and transactions

The literature has provided over a dozen explanations for the widely documented excessive trading puzzle of retail investors trading so much that it hurts their performance. It is difficult to use transaction data to differentiate these explanations as they share similar predictions by design. To confront this challenge, we design and administer a nationwide survey to elicit investors' responses to an exhaustive list of trading motives. By merging survey responses with account-level transaction data, we validate survey responses with actual trading behaviors and compare the power of survey-based and transaction-based trading motives. A horse race among survey- based trading motives suggests that perceived information advantage and gambling preference dominate other explanations. Moreover, other popular arguments, such as neglect of trading costs, do not contribute to excessive trading.