Sleep quality and trading behavior of individual investors on the stock market
Abstract
There are various factors that influence the trading behavior of individual investors in the stock market. This study, based on data from 405 individual investors, is the first to investigate the relationship between sleep quality and investors’ trading behavior in the stock market. Sleep quality is assessed through factors such as sleep time, duration, number of awakenings during the night, and napping habits. By applying various regression methods (Logit, PCA, PLSR, GMM), the results show that increased sleep duration causes passive investors to hold fewer stocks in their portfolios during bull market years and to increase their holdings when the market declines. Conversely, for active investors, an increase of sleep duration prompts them to hold a greater number of stocks in their portfolios during bull market periods, and decrease their holdings during bear markets. Moreover, good sleep quality is correlated with improved investment performance for passive investors. Research also indicates that afternoon naps and nighttime sleep affect investors’ trading frequency. This study provides valuable insights into investors’ trading behavior in the stock market. We encourage investors to enhance the quality of their sleep and incorporate regular midday naps to remain mentally alert, ultimately leading to increased investment returns.
Keyword : sleep quality, individual investors, investor behavior, trading frequency, return rate, investment
How to Cite
Quang, L. T., Vinh, T. T., Yen, N. D. H., & Duong, K. D. (2025). Sleep quality and trading behavior of individual investors on the stock market. Journal of Business Economics and Management, 26(2), 338–358. https://doi.org/10.3846/jbem.2025.23629
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Hoffmann, A. O., Post, T., & Pennings, J. M. (2015). How investor perceptions drive actual trading and risk-taking behavior. Journal of Behavioral Finance, 16(1), 94–103. https://doi.org/10.1080/15427560.2015.1000332
Horne, J. (2012). Working throughout the night: Beyond ‘sleepiness’ – impairments to critical decision making. Neuroscience & Biobehavioral Reviews, 36(10), 2226–2231. https://doi.org/10.1016/j.neubiorev.2012.08.005
Isaenko, S. (2023). Trading strategies and the frequency of time-series. The Quarterly Review of Economics and Finance, 90, 267–283. https://doi.org/10.1016/j.qref.2022.10.006
Jenkins, J. G., & Dallenbach, K. M. (1924). Obliviscence during sleep and waking. The American Journal of Psychology, 35(4), 605–612. https://doi.org/10.2307/1414040
Kahneman, D. (2011). Thinking, fast and slow. Macmillan.
Kales, A., & Rechtschaffen, A. (1968). A manual of standardized terminology, techniques and scoring system for sleep stages of human subjects. US Department of Health, Education and Welfare, Public Health Service, National Institutes of Health, National Institute of Neurological Diseases and Blindness, Neurological Information Network.
Kamstra, M. J., Kramer, L. A., & Levi, M. D. (2010). Effects of daylight-saving time changes on stock market volatility: A comment. Psychological Reports, 107(3), 877–887. https://doi.org/10.2466/03.07.PR0.107.6.877-887
Kamstra, M. J., Kramer, L. A., & Levi, M. D. (2000). Losing sleep at the market: The daylight saving anomaly. American Economic Review, 90(4), 1005–1011. https://doi.org/10.1257/aer.90.4.1005
Killgore, W. D., Balkin, T. J., & Wesensten, N. J. (2006). Impaired decision making following 49h of sleep deprivation. Journal of Sleep Research, 15(1), 7–13. https://doi.org/10.1111/j.1365-2869.2006.00487.x
Kourtidis, D., Šević, Ž., & Chatzoglou, P. (2011). Investors’ trading activity: A behavioural perspective and empirical results. The Journal of Socio-Economics, 40(5), 548–557. https://doi.org/10.1016/j.socec.2011.04.008
Kushida, C. (2013). Encyclopedia of sleep (vol. 1). Elsevier. https://doi.org/10.1016/B978-0-12-378610-4.00001-2
Liivamägi, K. (2016). Investor education and trading activity on the stock market. Baltic Journal of Economics, 16(2), 114–131. https://doi.org/10.1080/1406099X.2016.1189058
Lim, J., & Dinges, D. F. (2008). Sleep deprivation and vigilant attention. Annals of the New York Academy of Sciences, 1129(1), 305–322. https://doi.org/10.1196/annals.1417.002
LoCasio, C. (2009). Sleep-trading: The impact of jetlag and longitudinal distance on international bilateral trade in goods, equity and foreign direct investment. In Carroll Round Proceedings 2009 (pp. 3–18). The Carroll Round.
Markowitz, H. (1952). Portfolio selection. The Journal of Finance, 7(1). https://doi.org/10.2307/2975974
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Negrea, B., & Toma, M. (2017). Dynamic CAPM under ambiguity – an experimental approach. Journal of Behavioral and Experimental Finance, 16, 22–32. https://doi.org/10.1016/j.jbef.2017.09.001
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Nicolosi, G., Peng, L., & Zhu, N. (2009). Do individual investors learn from their trading experience? Journal of Financial Markets, 12, 317–336. https://doi.org/10.1016/j.finmar.2008.07.001
Nofsinger, J. R., & Shank, C. A. (2018). DEEP sleep: The impact of sleep on the financial risk taking. Review of Financial Economics, 37(1), 92–105. https://doi.org/10.1002/rfe.1034
Nofsinger, J., Patterson, F., & Shank, C. (2018). Decision making, financial risk aversion, and behavioral biases: The role of testosterone and stress. Journal of Economics and Human Biology, 29, 1–16. https://doi.org/10.1016/j.ehb.2018.01.003
Pasha, C. (2014). Increasing productivity in the Big 4: A research note. Journal of Technology Management in China, 9(3), 297–302. https://doi.org/10.1108/JTMC-10-2014-0055
Plihal, W., & Born, J. (1997). Effects of early and late nocturnal sleep on declarative and procedural memory. Journal of Cognitive Neuroscience, 9(4), 534–547. https://doi.org/10.1162/jocn.1997.9.4.534
Quang, L. T., Linh, N. D., Van Nguyen, D., & Khoa, D. D. (2023). Behavioral factors influencing individual investors’ decision making in Vietnam market. Journal of Eastern European and Central Asian Research (JEECAR), 10(2), 264–280. https://doi.org/10.15549/jeecar.v10i2.1032
Saivasan, R., & Lokhande, M. (2022). Influence of risk propensity, behavioural biases and demographic factors on equity investors’ risk perception. Asian Journal of Economics and Banking, 6(3), 373–403. https://doi.org/10.1108/AJEB-06-2021-0074
Shavandi, A., & Khedmati, M. (2022). A multi-agent deep reinforcement learning framework for algorithmic trading in financial markets. Expert Systems with Applications, 208, Article 118124. https://doi.org/10.1016/j.eswa.2022.118124
Stickgold, R. (2005). Sleep-dependent memory consolidation. Nature, 437(7063), 1272–1278. https://doi.org/10.1038/nature04286
Telzer, E. H., Fuligni, A. J., Lieberman, M. D., & Galván, A. (2013). The effects of poor quality sleep on brain function and risk taking in adolescence. Neuroimage, 71, 275–283. https://doi.org/10.1016/j.neuroimage.2013.01.025
Van Der Helm, E., Gujar, N., & Walker, M. P. (2010). Sleep deprivation impairs the accurate recognition of human emotions. Sleep, 33(3), 335–342. https://doi.org/10.1093/sleep/33.3.335
Venkatraman, V., Chuah, Y. L., Huettel, S. A., & Chee, M. W. (2007). Sleep deprivation elevates expectation of gains and attenuates response to losses following risky decisions. Sleep, 30(5), 603–609. https://doi.org/10.1093/sleep/30.5.603
Walker, M. (2017). Why we sleep: Unlocking the power of sleep and dreams. Simon and Schuster.
Yang, P. Y., Ho, K. H., Chen, H. C., & Chien, M. Y. (2012). Exercise training improves sleep quality in middle-aged and older adults with sleep problems: a systematic review. Journal of Physiotherapy, 58(3), 157–163. https://doi.org/10.1016/S1836-9553(12)70106-6
Yun, M., & Beehr, T. (2023). Eating versus sleeping: Lunchtime meals and naps relation to afternoon creativity at work. Applied Psychology: Health and Well-Being, 15(4), 1319–1335. https://doi.org/10.1111/aphw.12438
Bechara, A., & Damasio, A. R. (2005). The somatic marker hypothesis: A neural theory of economic decision. Games and Economic Behavior, 52(2), 336–372. https://doi.org/10.1016/j.geb.2004.06.010
Boguth, O., Carlson, M., Fisher, A., & Simutin, M. (2016). Horizon effects in average returns: The role of slow information diffusion. The Review of Financial Studies, 29(8), 2241–2281. https://doi.org/10.1093/rfs/hhw024
Buysse, D., Reynolds, C., Monk, T., Berman, S., & Kupfer, D. (1989). The Pittsburgh sleep quality index: A new instrument for psychiatric practice and research. Psychiatry Research, 28, 193–213. https://doi.org/10.1016/0165-1781(89)90047-4
Damasio, A. R. (1994). Descartes’ error: Emotion, reason, and human brain. G.P. Putnam’s Son.
Dement, W., & Kleitman, N. (1957). Cyclic variations in EEG during sleep and their relation to eye movements, body motility, and dreaming. Electroencephalography and Clinical Neurophysiology, 9(4), 673–690. https://doi.org/10.1016/0013-4694(57)90088-3
Durmer, J. S., & Dinges, D. F. (2005, March). Neurocognitive consequences of sleep deprivation. Seminars in Neurology, 25(1), 117–129. https://doi.org/10.1055/s-2005-867080
Ekinci, C., & Ersan, O. (2022). High-frequency trading and market quality: The case of a “slightly exposed” market. International Review of Financial Analysis, 79, Article 102004. https://doi.org/10.1016/j.irfa.2021.102004
Euston, D. R., Gruber, A. J., & McNaughton, B. L. (2012). The role of medial prefrontal cortex in memory and decision making. Neuron, 76(6), 1057–1070. https://doi.org/10.1016/j.neuron.2012.12.002
Evans, J. S. B., & Curtis-Holmes, J. (2005). Rapid responding increases belief bias: Evidence for the dual-process theory of reasoning. Thinking & Reasoning, 11(4), 382–389. https://doi.org/10.1080/13546780542000005
Feng, L., & Seasholes, M. S. (2005). Do investor sophistication and trading experience eliminate behavioral biases in financial markets? Review of Finance, 9, 305–351. https://doi.org/10.1007/s10679-005-2262-0
Ficca, G., Axelsson, J., Mollicone, D. J., Muto, V., & Vitiello, M. V. (2010). Naps, cognition and performance. Sleep Medicine Reviews, 14(4), 249–258. https://doi.org/10.1016/j.smrv.2009.09.005
Foley, D. J., Monjan, A. A., Brown, S. L., Simonsick, E. M., Wallace, R. B., & Blazer, D. G. (1995). Sleep complaints among elderly persons: An epidemiologic study of three communities. Sleep, 18(6), 425–432. https://doi.org/10.1093/sleep/18.6.425
Garrett, I., Kamstra, M. J., & Kramer, L. A. (2005). Winter blues and time variation in the price of risk. Journal of Empirical Finance, 12(2), 291–316. https://doi.org/10.1016/j.jempfin.2004.01.002
Gelman, A., & Hill, J. (2007). Data analysis asing regression and multilevel/hierarchical models. Cambridge University Press. https://doi.org/10.32614/CRAN.package.arm
Gonzalez, A., & Li, X. (2024). Let me sleep on it: sleep and investor reactions to earnings surprises. The European Journal of Finance, 30(12), 1327–1344. https://doi.org/10.1080/1351847X.2023.2287065
Graham, B., & Dodd, D. L. (1934). Security analysis. McGraw-Hill Book Company.
Guarana, C. L., Stevenson, R. M., Gish, J. J., Ryu, J. W., & Crawley, R. (2022). Owls, larks, or investment sharks? The role of circadian process in early-stage investment decisions. Journal of Business Venturing, 37(1), Article 106165. https://doi.org/10.1016/j.jbusvent.2021.106165
Han, H. S., Sheng, J., & Sun, Z. (2023). Trading in twilight: Sleep and retail investors’ stock investment performance (Working paper). https://cba.lmu.edu/media/lmucollegeofbusinessadministration/departments/finance/Paper1.pdf
Hoffmann, A. O., Post, T., & Pennings, J. M. (2015). How investor perceptions drive actual trading and risk-taking behavior. Journal of Behavioral Finance, 16(1), 94–103. https://doi.org/10.1080/15427560.2015.1000332
Horne, J. (2012). Working throughout the night: Beyond ‘sleepiness’ – impairments to critical decision making. Neuroscience & Biobehavioral Reviews, 36(10), 2226–2231. https://doi.org/10.1016/j.neubiorev.2012.08.005
Isaenko, S. (2023). Trading strategies and the frequency of time-series. The Quarterly Review of Economics and Finance, 90, 267–283. https://doi.org/10.1016/j.qref.2022.10.006
Jenkins, J. G., & Dallenbach, K. M. (1924). Obliviscence during sleep and waking. The American Journal of Psychology, 35(4), 605–612. https://doi.org/10.2307/1414040
Kahneman, D. (2011). Thinking, fast and slow. Macmillan.
Kales, A., & Rechtschaffen, A. (1968). A manual of standardized terminology, techniques and scoring system for sleep stages of human subjects. US Department of Health, Education and Welfare, Public Health Service, National Institutes of Health, National Institute of Neurological Diseases and Blindness, Neurological Information Network.
Kamstra, M. J., Kramer, L. A., & Levi, M. D. (2010). Effects of daylight-saving time changes on stock market volatility: A comment. Psychological Reports, 107(3), 877–887. https://doi.org/10.2466/03.07.PR0.107.6.877-887
Kamstra, M. J., Kramer, L. A., & Levi, M. D. (2000). Losing sleep at the market: The daylight saving anomaly. American Economic Review, 90(4), 1005–1011. https://doi.org/10.1257/aer.90.4.1005
Killgore, W. D., Balkin, T. J., & Wesensten, N. J. (2006). Impaired decision making following 49h of sleep deprivation. Journal of Sleep Research, 15(1), 7–13. https://doi.org/10.1111/j.1365-2869.2006.00487.x
Kourtidis, D., Šević, Ž., & Chatzoglou, P. (2011). Investors’ trading activity: A behavioural perspective and empirical results. The Journal of Socio-Economics, 40(5), 548–557. https://doi.org/10.1016/j.socec.2011.04.008
Kushida, C. (2013). Encyclopedia of sleep (vol. 1). Elsevier. https://doi.org/10.1016/B978-0-12-378610-4.00001-2
Liivamägi, K. (2016). Investor education and trading activity on the stock market. Baltic Journal of Economics, 16(2), 114–131. https://doi.org/10.1080/1406099X.2016.1189058
Lim, J., & Dinges, D. F. (2008). Sleep deprivation and vigilant attention. Annals of the New York Academy of Sciences, 1129(1), 305–322. https://doi.org/10.1196/annals.1417.002
LoCasio, C. (2009). Sleep-trading: The impact of jetlag and longitudinal distance on international bilateral trade in goods, equity and foreign direct investment. In Carroll Round Proceedings 2009 (pp. 3–18). The Carroll Round.
Markowitz, H. (1952). Portfolio selection. The Journal of Finance, 7(1). https://doi.org/10.2307/2975974
Mendelson, M., Borowik, A., Michallet, A. S., Perrin, C., Monneret, D., Faure, P., Levy, P., Pépin, J.-L., Wuyam, B., & Flore, P. (2016). Sleep quality, sleep duration and physical activity in obese adolescents: Effects of exercise training. Pediatric Obesity, 11(1), 26–32. https://doi.org/10.1111/ijpo.12015
Negrea, B., & Toma, M. (2017). Dynamic CAPM under ambiguity – an experimental approach. Journal of Behavioral and Experimental Finance, 16, 22–32. https://doi.org/10.1016/j.jbef.2017.09.001
Ngo, H. V. V., Martinetz, T., Born, J., & Mölle, M. (2013). Auditory closed-loop stimulation of the sleep slow oscillation enhances memory. Neuron, 78(3), 545–553. https://doi.org/10.1016/j.neuron.2013.03.006
Nicolosi, G., Peng, L., & Zhu, N. (2009). Do individual investors learn from their trading experience? Journal of Financial Markets, 12, 317–336. https://doi.org/10.1016/j.finmar.2008.07.001
Nofsinger, J. R., & Shank, C. A. (2018). DEEP sleep: The impact of sleep on the financial risk taking. Review of Financial Economics, 37(1), 92–105. https://doi.org/10.1002/rfe.1034
Nofsinger, J., Patterson, F., & Shank, C. (2018). Decision making, financial risk aversion, and behavioral biases: The role of testosterone and stress. Journal of Economics and Human Biology, 29, 1–16. https://doi.org/10.1016/j.ehb.2018.01.003
Pasha, C. (2014). Increasing productivity in the Big 4: A research note. Journal of Technology Management in China, 9(3), 297–302. https://doi.org/10.1108/JTMC-10-2014-0055
Plihal, W., & Born, J. (1997). Effects of early and late nocturnal sleep on declarative and procedural memory. Journal of Cognitive Neuroscience, 9(4), 534–547. https://doi.org/10.1162/jocn.1997.9.4.534
Quang, L. T., Linh, N. D., Van Nguyen, D., & Khoa, D. D. (2023). Behavioral factors influencing individual investors’ decision making in Vietnam market. Journal of Eastern European and Central Asian Research (JEECAR), 10(2), 264–280. https://doi.org/10.15549/jeecar.v10i2.1032
Saivasan, R., & Lokhande, M. (2022). Influence of risk propensity, behavioural biases and demographic factors on equity investors’ risk perception. Asian Journal of Economics and Banking, 6(3), 373–403. https://doi.org/10.1108/AJEB-06-2021-0074
Shavandi, A., & Khedmati, M. (2022). A multi-agent deep reinforcement learning framework for algorithmic trading in financial markets. Expert Systems with Applications, 208, Article 118124. https://doi.org/10.1016/j.eswa.2022.118124
Stickgold, R. (2005). Sleep-dependent memory consolidation. Nature, 437(7063), 1272–1278. https://doi.org/10.1038/nature04286
Telzer, E. H., Fuligni, A. J., Lieberman, M. D., & Galván, A. (2013). The effects of poor quality sleep on brain function and risk taking in adolescence. Neuroimage, 71, 275–283. https://doi.org/10.1016/j.neuroimage.2013.01.025
Van Der Helm, E., Gujar, N., & Walker, M. P. (2010). Sleep deprivation impairs the accurate recognition of human emotions. Sleep, 33(3), 335–342. https://doi.org/10.1093/sleep/33.3.335
Venkatraman, V., Chuah, Y. L., Huettel, S. A., & Chee, M. W. (2007). Sleep deprivation elevates expectation of gains and attenuates response to losses following risky decisions. Sleep, 30(5), 603–609. https://doi.org/10.1093/sleep/30.5.603
Walker, M. (2017). Why we sleep: Unlocking the power of sleep and dreams. Simon and Schuster.
Yang, P. Y., Ho, K. H., Chen, H. C., & Chien, M. Y. (2012). Exercise training improves sleep quality in middle-aged and older adults with sleep problems: a systematic review. Journal of Physiotherapy, 58(3), 157–163. https://doi.org/10.1016/S1836-9553(12)70106-6
Yun, M., & Beehr, T. (2023). Eating versus sleeping: Lunchtime meals and naps relation to afternoon creativity at work. Applied Psychology: Health and Well-Being, 15(4), 1319–1335. https://doi.org/10.1111/aphw.12438