THE IMPACT OF EASE OF TRADING ON BEHAVIORAL ERRORS: EVIDENCE FROM ONLINE INVESTORS

Abstract

The widespread use of internet trading platforms has greatly decreased trade friction, prompting concerns about the behavioral consequences for ordinary investors. This study evaluates whether ease of trading leads to behavioral errors among online equities investors, as well as the mediating impact of overconfidence. The study uses survey data from online traders and structural equation modeling to investigate the links between ease of trading, overconfidence, trading frequency, and behavioral errors. The findings show that ease of trading greatly increases overconfidence and trading frequency, which leads to more behavioral errors. Overconfidence is observed to partially moderate the association between trading convenience and behavioral errors, but financial knowledge reduces this impact. The findings add to the behavioral finance literature by emphasizing the significance of platform design in determining investor behavior. They have substantial implications for investors, platform developers, and regulators.