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Editorial Rating

7

Qualities

  • Analytical
  • Applicable
  • Hot Topic

Recommendation

In this detailed research report, economists Marco Cipriani, Roberta De Filippis, Antonio Guarino and Ryan Kendall assess the performance differences between professional and nonprofessional financial traders. In an expert-versus-novice contest, the authors find that intellectual capability has little to do with the two groups’ widely dissimilar results; rather, experience emerges as a critical differentiator in investment outcomes. Tyro investors as well as market pros will find useful – but perhaps unsurprising – insights in this rigorous analysis.

Take-Aways

  • Research shows that cognitive abilities do not account for outcome variations between professional and nonprofessional traders.
  • Novices become enmeshed in bubbles, while professionals avoid them.
  • Financial traders use experience, market knowledge and strategic thinking to produce outsized profits.

About the Authors

Marco Cipriani is an assistant vice president at the Federal Reserve Bank of New York. Roberta De Filippis is a junior policy analyst at the European Banking Authority. Antonio Guarino is an economics professor at University College London, where Ryan Kendall is a senior research fellow.