Brad Barber, Yi-Tsung Lee, Yu-Jane Lui and Terrance Odean analysed the Taiwanese market and showed that individual private investor losses equated to a 3.8% penalty on their performance, equivalent to a giant 2.2% of Taiwan’s GDP each year between 1995 and 1999.
Their empirical analysis presents a clear portrait of who benefits from trade: Individuals lose, institutions win. While individual investors incur substantial losses, each of the four institutional groups that we analyze – corporations, dealers, foreigners, and mutual funds – gain from trade.
The research can be found here, it is a rather technical paper, the conclusion can be found on pages 19 and 20:
http://finance.martinsewell.com/traders/Barber-etal2006.pdf
A blog trying to estimate the damage for the US traders:
http://www.psyfitec.com/2012/01/160-billion-dollar-bezzle.html
The estimate by the blogger of the losses in the US is USD 160,000,000,000, an unbelievable high amount which I can't verify, but which might be roughly right.
I have written in the past about long term returns on the Bursa Malaysia:
http://cgmalaysia.blogspot.com/2011/09/bursa-long-term-returns.html
I estimated a loss of 1-2% per year due to trading (brokerage etc). Reviewing the above research I might have been too optimistic. Which means that my guess of 4-5% yearly returns is too high.
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