The profitability of day trading: An empirical study using high-quality data

ABSTRACT

This study investigates the profitability and characteristics of day trading in the KOSPI 200 futures market, one of the largest and most remarkable index futures markets in the world. By using a high-quality data set that classifies various investors into a number of key categories and provides detailed information on their identity, we find that domestic individuals face substantial losses from day trading and that individual day traders who trade more frequently and heavily are more likely to suffer such losses. In contrast to individual day traders, who account for the largest portion of total day trading activity but perform poorly, domestic money managers and foreign institutional investors generally make substantial profits through day trading, which is noteworthy in that their day trading activity accounts for only a small portion of total day trading activity in the futures market.