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Individual Investor Trading and Stock Returns

Tabatabaei, Elham | 2020

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 52906 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Talebiyan, Masoud; Ebrahimnejad, Ali
  7. Abstract:
  8. For a Variety of reasons, financial economists tend to view individuals and institutions differently. In particular, while institutions are viewed as informed investors, individuals are believed to have psychological biases and are often thought of as the proverbial noise traders. One of the questions of interest to researchers in finance is how the behavior of different investor clienteles or their interaction in the market affects returns. In this paper we focus on the interaction between individual investors and stock returns in Iran capital market. Specifically, first we examine the extent to which intense net buying or selling by individuals in a stock is related to the stock’s past returns and second, the extent to which such intense net trading by individuals predicts future returns. Also by exploring the intensive behavior of individual investors and the past returns of the stocks which are being studied, we try to answer the question that if these investors are momentum traders or contrarian ones.By relying on the results of this study, we find that individual investors should be considered as emotional traders in Iran capital market, who tend to trade after mere increment in stocks’ returns in subsequent weeks. In other words, stocks’ past returns can predict the intensive individual tradings outbreak, but not the direction of them (in terms of buying and selling). In addition, intense net trading by individuals is not capable of predicting future returns
  9. Keywords:
  10. Individual Investors ; Momentum Traders ; Contrarian Traders ; Short-Term Returns ; Long-Term Returns ; Trading Behavior ; Stock Return

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