Curriculum·R408 The Professional Operating System·about 33 min
If you continue
By the end of this lesson you can
- →State the five conditions under which continuing is a considered decision
- →Read the evidence that skill differences exist and persist, without over-reading it
- →Compute what fees take from the top and bottom of a measured skill distribution
- →Set the annual review that keeps the decision current
Senior · enrolled learners
This lesson opens with The cross-section of speculator skill, Taiwan 1992 to 2006.
- What happened
- Brad Barber, Yi-Tsung Lee, Yu-Jane Liu and Terrance Odean analyzed the complete record of day trading activity in Taiwan across 1992 to 2006, ranking traders on past performance and then measuring what those groups went on to earn. The differences were large and they persisted. The 500 top-ranked day traders subsequently earned about 61.3 basis points per day before fees and about 37.9 after fees, while bottom-ranked traders subsequently earned about negative 11.5 basis points before fees and negative 28.9 after. The authors nonetheless reported that few day traders earn positive abnormal returns net of fees, so the persistent skill they documented sits at the extreme end of a distribution whose bulk does not clear its own costs.
- The decision point
- Both halves of this are load bearing and people usually take only one. Skill in this activity is real, measurable and persistent, which means the outcome is not a lottery. And the group in which it is demonstrable is very small, and the same data shows fees removing 23.4 basis points a day from the people at the top. So the honest position is that continuing can be a considered decision and it requires evidence about yourself that most people never gather.
What you will be able to answer
- →What are the five conditions?
- →What does the Taiwan evidence show?
- →What did fees take?
- →What is the annual review?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://faculty.haas.berkeley.edu/odean/papers/day%20traders/The%20Cross-Section%20of%20Speculator%20Skill.pdf
- https://papers.ssrn.com/sol3/papers.cfm?abstract_id=529063
- https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3423101
- https://www.esma.europa.eu/press-news/esma-news/esma-agrees-prohibit-binary-options-and-restrict-cfds-protect-retail-investors
Confidence medium·Volatility high·Reviewed 2026-08-07·Owner unassigned
Contested
The basis point figures are daily returns on the positions traded rather than on total wealth, so they must not be annualised naively, and the ranking is formed on past performance which per R405-03 introduces its own selection questions that the authors address at length. The finding this lesson relies on is that the ranking had predictive content, which is the paper's central claim and is what makes it relevant here.
Taiwan across 1992 to 2006 is a specific market in a specific period with its own microstructure and cost regime. Per P6 the transferable finding is that persistent skill differences exist in speculative trading, not that any particular magnitude applies anywhere else.
Per P10 nothing in this lesson suggests that anybody will be in the group described, and per R405-04 the evidence required to locate yourself in a distribution is larger than most records contain. This lesson sets conditions rather than expectations.