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The Effects of The Presence of Retail Investors on the Liquidity of the Iranian Stock Market and Short-Term Stock Returns

Jamshidi Sani, Meysam | 2024

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 56999 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Talebian, Masoud; Haghbaali, Mehdi
  7. Abstract:
  8. Although the differences between retail and institutional investors in the stock market can have important effects on key processes such as liquidity and price formation in this market, there are significant differences of opinion about how these differences would affect mentioned processes. An interesting question for financial researchers is how the effects of different groups affect the liquidity of the stock market. Liquidity is defined as the ability to carry out transactions with high speed, low cost and without being heavily influenced by the price. In this research, using 10-year stock information (2012-2022) such as order book, price and volume of transactions, we showed that the transactions of retail investors can improve liquidity from the point of view of transaction turnover rate, but they increase the proportional Bid-ask spreads. Also, their transactions have no significant effect on Amihud's illiquidity criterion. In addition, we showed that the presence of retail investors on the sales side reduces liquidity in the market. Finally, we measured the effect of the transactions of this group of traders on the short-term return of stocks and showed that the net intense buying portfolio has earned a higher return than the net intense selling portfolio in the week after the formation of the portfolio
  9. Keywords:
  10. Bid-Ask Spread ; Short-Term Returns ; Excess Return ; Liquidity ; Retail Investors ; Proportional Bid-Ask Spread

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