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Individual Investors (individual + investor)
Selected AbstractsPeer Effects in the Trading Decisions of Individual InvestorsFINANCIAL MANAGEMENT, Issue 2 2010Lilian Ng This study examines for evidence of peer effects in the trading decisions of individual investors from Mainland China, a country whose cultural and social structures are vastly different from those of Western countries. Cultural differences, as widely documented, play a significant role in social interactions and word-of-mouth behavior. In contrast to US studies, we find robust evidence that the trading decisions of Chinese investors are influenced, via word of mouth, by those of their peers who maintain brokerage accounts at the same branch, but not by those whose accounts are maintained at another branch located in the same city. [source] Capital Gains Taxes and Equity Trading: Empirical EvidenceJOURNAL OF ACCOUNTING RESEARCH, Issue 4 2003Jennifer L. Blouin Individual investors have an incentive to defer selling appreciated stock until it qualifies for tax-favored, long-term capital gains treatment. Shackelford and Verrecchia [2002] show that these incentives can affect equity trading around public disclosures. This article provides some empirical support for their theory with evidence of price increases and equity constrictions around announcements of quarterly earnings and additions to the S&P 500 index. We find share returns rise and trading volume falls with the incremental taxes saved by deferring the sale of appreciated property. The price increases, however, are temporary, reversing in subsequent trading days. The results are consistent with buyers believing the compensation to sell before long-term qualification (through higher prices) is less costly than holding an inappropriately weighted portfolio. This finding,that personal capital gains taxes affect equity trading,adds to a growing literature that challenges longstanding assumptions that firm value is independent of shareholders and their taxes. [source] Rain or Shine: Where is the Weather Effect?EUROPEAN FINANCIAL MANAGEMENT, Issue 5 2005William N. Goetzmann G12; G14 Abstract There is considerable empirical evidence that emotion influences decision-making. In this paper, we use a database of individual investor accounts to examine the weather effects on traders. Our analysis of the trading activity in five major US cities over a six-year period finds virtually no difference in individuals' propensity to buy or sell equities on cloudy days as opposed to sunny days. If the association between cloud cover and stock returns documented for New York and other world cities is indeed caused by investor mood swings, our findings suggest that researchers should focus on the attitudes of market-makers, news providers or other agents physically located in the city hosting the exchange. NYSE spreads widen on cloudy days. When we control for this, the weather effect becomes smaller and insignificant. We interpret this as evidence that the behaviour of market-makers, rather than individual investors, may be responsible for the relation between returns and weather. [source] Peer Effects in the Trading Decisions of Individual InvestorsFINANCIAL MANAGEMENT, Issue 2 2010Lilian Ng This study examines for evidence of peer effects in the trading decisions of individual investors from Mainland China, a country whose cultural and social structures are vastly different from those of Western countries. Cultural differences, as widely documented, play a significant role in social interactions and word-of-mouth behavior. In contrast to US studies, we find robust evidence that the trading decisions of Chinese investors are influenced, via word of mouth, by those of their peers who maintain brokerage accounts at the same branch, but not by those whose accounts are maintained at another branch located in the same city. [source] Price Clustering: Evidence Using Comprehensive Limit-Order DataFINANCIAL REVIEW, Issue 1 2009Chaoshin Chiao G14; G15 Abstract Employing comprehensive limit-order data which identify investor types, this paper examines the clustering pattern of limit-order prices. First, limit orders, particularly those submitted by individual investors (IIs), tend to cluster at integer and even prices. Second, nonmarketable limit-order prices cluster more than marketable limit-order prices, indicating that aggressive limit orders generally embed more information. Third, investors choosing even-priced limit orders are not penalized by lower execution ratios. Fourth, investors (particularly IIs) strategically exhibit front-running behavior. Fifth, price clustering indeed creates price barriers. Finally, the degree of price clustering using trade data is significantly underestimated, compared to that using limit-order data. [source] Why Do Firms Issue Equity after Splitting Stocks?FINANCIAL REVIEW, Issue 3 2003Ranjan D'Mello G14/G30/G32 Abstract This paper examines the motivations of firms that conduct seasoned equity offerings (SEOs) after splitting stocks. We find no difference in equity announcement and issue period returns between these firms and other equity-issuing firms, suggesting that firms do not split stocks to reveal information and reduce adverse selection costs at the subsequent SEO. However, because investors react positively to split announcements, firms that issue equity after splitting stocks sell new shares at a higher price and raise more funds. We also find that firms split stocks to make the subsequent SEO more marketable to individual investors who are attracted to low-priced shares. [source] Are All Professional Investors Sophisticated?GERMAN ECONOMIC REVIEW, Issue 4 2010Lukas Menkhoff Institutional investors; investment advisors; individual investors; investment behavior Abstract. Existing empirical evidence is inconclusive as to whether professional investors show more sophisticated behavior than individual investors. Therefore, we study two important groups of professional investors and compare them with laymen by means of a survey covering about 500 investors. We find that some professionals, i.e. institutional investors, behave in a more sophisticated manner than laymen, whereas the less researched investment advisors seem to do even worse. Our survey approach complements available evidence due to its design: it compares professionals with (qualified) interested laymen, it covers six measures of sophisticated behavior, uses several control variables and strictly compares investment decisions in the private domain. [source] Effect of Investor Category Trading Imbalances on Stock Returns,INTERNATIONAL REVIEW OF FINANCE, Issue 3-4 2008DAVID COLWELL ABSTRACT Trading is the mechanism of the economist's ,invisible hand,' the means by which price discovery occurs. We use daily shareholdings data from the Australian equities clearinghouse to investigate the impact of the trading imbalances of investor categories on stock returns. Our evidence does not contradict the behavioral finance assumption that the trading of individual investors contributes to price discovery. Furthermore, we find that, while the trading of all investor categories Granger-causes returns, returns Granger-cause trading only for the individual investor category. That is, in the short term of up to 1 month, only individual investors engage in feedback trading. [source] How do Individual, Institutional, and Foreign Investors Win and Lose in Equity Trades?INTERNATIONAL REVIEW OF FINANCE, Issue 3-4 2006Evidence from Japan ABSTRACT We investigate the gains and losses from equity trades of individual investors, various institutional investors, and foreign investors in the Tokyo Stock Exchange. We develop a trade-weighted performance measure and examine the impact of trading intervals, price spreads, and market timing on performance. We find that different investor types gain or lose from different sources. For example, we discover that individual investors have poor market timing ability but potentially gain during short-run trading intervals as their average sell price is consistently higher than the average purchase price. In contrast, we find that foreign investors consistently generate gains from trade due to good market timing, although their average sell price is lower than the average purchase price. Also, we find that foreign investors extract significant portion of their gains by trading against Japanese institutional investors when Japanese investors trade before their fiscal-year end. [source] Wealth Transfer Effects of Analysts' Misleading BehaviorJOURNAL OF ACCOUNTING RESEARCH, Issue 1 2007GUS DE FRANCO ABSTRACT We investigate a sample of 50 firm-events, identified in the Global Research Analysts Settlement, in which analysts were discovered to have acted misleadingly ex post. In this setting, analysts' incentives caused them to issue public disclosures that differed from their private beliefs. We document that these firms' institutional holdings decline significantly during the period in which the analysts issued misleading disclosures. During this period daily small-size trades (a proxy for individual investors) are dominated by buy orders while daily large-size trades (a proxy for institutional investors) are dominated by sell orders. Short interest increases during the event period, consistent with the idea that sophisticated investors are selling. Our estimates of investors' trading losses show that individual investors lost about two and a half times the amount lost by institutions. Overall, the results suggest a wealth transfer from individuals to institutions that is likely attributable to analysts' misleading behavior. [source] To buy or to sell: cultural differences in stock market decisions based on price trendsJOURNAL OF BEHAVIORAL DECISION MAKING, Issue 4 2008Li-Jun Ji Abstract Four studies compared the stock market decisions of Canadians and Chinese. In two studies using simple stock market trends, compared with Chinese, Canadians were more willing to sell and less willing to buy falling stock. But when the stock price was rising, the opposite occurred: Canadians were more willing to buy and less willing to sell. A third study showed that for complex stock price trends, Canadians were strongly influenced by the most recent price trends: they tended to predict that recent trends would continue and made selling decisions without considering the rest of the trend patterns; whereas the Chinese made reversal predictions for the dominant trends and made decisions that took both recent and early trends into consideration. Study 4 replicated the finding with experienced individual investors. These findings are consistent with the previous literature on different lay theories of change held by Chinese and North Americans. Copyright © 2008 John Wiley & Sons, Ltd. [source] Presidential Address: Sophisticated Investors and Market EfficiencyTHE JOURNAL OF FINANCE, Issue 4 2009JEREMY C. STEIN ABSTRACT Stock-market trading is increasingly dominated by sophisticated professionals, as opposed to individual investors. Will this trend ultimately lead to greater market efficiency? I consider two complicating factors. The first is crowding,the fact that, for a wide range of "unanchored" strategies, an arbitrageur cannot know how many of his peers are simultaneously entering the same trade. The second is leverage,when an arbitrageur chooses a privately optimal leverage ratio, he may create a fire-sale externality that raises the likelihood of a severe crash. In some cases, capital regulation may be helpful in dealing with the latter problem. [source] Who Gambles in the Stock Market?THE JOURNAL OF FINANCE, Issue 4 2009ALOK KUMAR ABSTRACT This study shows that the propensity to gamble and investment decisions are correlated. At the aggregate level, individual investors prefer stocks with lottery features, and like lottery demand, the demand for lottery-type stocks increases during economic downturns. In the cross-section, socioeconomic factors that induce greater expenditure in lotteries are associated with greater investment in lottery-type stocks. Further, lottery investment levels are higher in regions with favorable lottery environments. Because lottery-type stocks underperform, gambling-related underperformance is greater among low-income investors who excessively overweight lottery-type stocks. These results indicate that state lotteries and lottery-type stocks attract very similar socioeconomic clienteles. [source] Does Corporate Headquarters Location Matter for Stock Returns?THE JOURNAL OF FINANCE, Issue 4 2006CHRISTO PIRINSKY ABSTRACT We document strong comovement in the stock returns of firms headquartered in the same geographic area. Moreover, stocks of companies that change their headquarters location experience a decrease in their comovement with stocks from the old location and an increase in their comovement with stocks from the new location. The local comovement of stock returns is not explained by economic fundamentals and is stronger for smaller firms with more individual investors and in regions with less financially sophisticated residents. We argue that price formation in equity markets has a significant geographic component linked to the trading patterns of local residents. [source] The Dynamics of Institutional and Individual TradingTHE JOURNAL OF FINANCE, Issue 6 2003John M. Griffin We study the daily and intradaily cross-sectional relation between stock returns and the trading of institutional and individual investors in Nasdaq 100 securities. Based on the previous day's stock return, the top performing decile of securities is 23.9% more likely to be bought in net by institutions (and sold by individuals) than those in the bottom performance decile. Strong contemporaneous daily patterns can largely be explained by net institutional (individual) trading positively (negatively) following past intradaily excess stock returns (or the news associated therein). In comparison, evidence of return predictability and price pressure are economically small. [source] A Theory of Dividends Based on Tax ClientelesTHE JOURNAL OF FINANCE, Issue 6 2000Franklin Allen This paper explains why some firms prefer to pay dividends rather than repurchase shares. When institutional investors are relatively less taxed than individual investors, dividends induce "ownership clientele" effects. Firms paying dividends attract relatively more institutions, which have a relative advantage in detecting high firm quality and in ensuring firms are well managed. The theory is consistent with some documented regularities, specifically both the presence and stickiness of dividends, and offers novel empirical implications, e.g., a prediction that it is the tax difference between institutions and retail investors that determines dividend payments, not the absolute tax payments. [source] The disposition effect and investment performance in the futures marketTHE JOURNAL OF FUTURES MARKETS, Issue 6 2009Hyuk Choe This study examines whether the disposition effect (DE), i.e., the tendency of investors to ride losses and realize gains, exists in the Korean stock index futures market. Using a unique database, we find strong evidence for the DE and explain this in terms of investor characteristics. We also investigate the effect that the disposition bias has on investment performance. There are four main findings. First, individual investors are much more susceptible to the DE than institutional and foreign investors. Second, sophistication and trading experience tend to reduce the DE. Third, the DE is stronger in long positions than in short positions. Finally, there is a negative relationship between the DE and investment performance. This result is consistent with Odean (1998, Journal of Finance, 53, 1775,1798), but contrasts with Locke and Mann (2005, Journal of Financial Economics, 76, 401,444) who find no evidence of any contemporaneous measurable costs associated with the DE. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:496,522, 2009 [source] ANTHROPOLOGICAL APPROACHES TO THE GLOBAL FOOD CRISIS: UNDERSTANDING AND ADDRESSING THE "SILENT TSUNAMI"ANNALS OF ANTHROPOLOGICAL PRACTICE, Issue 1 2009David Himmelgreen The food riots and demonstrations that occurred in more than 50 countries in 2008 signaled the oncoming global economic recession. Skyrocketing food and fuel prices spurred on violence in poorer countries where there is no social safety net and in places impacted by food insecurity and malnutrition. Today, while the prices for some food staples have retracted a little, the deepening economic recession poses a threat in wealthier nations including the United States and members of the European Union. For example, the shuttering fall in the U.S. stock market in October 2008 resulted in the loss of billions of dollars not only to individual investors but also to states and local municipalities. In this environment, there is a potentially grave threat to the social safety net in the United States including food assistance programs. The World Food Program (WFP) has cited the increase in world food prices as the biggest challenge in its 45-year history, calling the impact a "silent tsunami" that threatened to plunge millions into hunger. In this volume, practicing and applied anthropologists examine the current global food crisis in a variety of settings including Belize, Cuba, the Dominican Republic, Ethiopia, Lesotho, Mozambique, Tanzania, and the United States. Further, they use a variety of theoretical orientations and methodological approaches to understand the chronic nature of food insecurity and the ways in which global food policies and economic restructuring have resulted in increasing food inequities across the globe. Throughout this volume, the authors make suggestions for combating the global food crisis through the application of anthropological principles and practices. [source] The Effect of Board-Related Reforms on Investors' ConfidenceAUSTRALIAN ACCOUNTING REVIEW, Issue 2 2008Janet Lee We survey Australian institutional and individual investors regarding how board-related reforms in the Australian Stock Exchange Corporate Governance Council 2003 recommendations and changes to the Corporations Act 2001 in 2004 affect their confidence as investors. The overall results are consistent with suggestions that individual and institutional investors differ in their corporate governance preferences and expectations. The results reveal that, for both individual and institutional investors, the average investor's confidence is improved by increased independence of the board and its committees, increased disclosures of corporate governance information, and CEO and CFO responsibility for the integrity of financial statements. The effect is strongest for individual investors, who also expect greater time commitments by non-executive directors. Institutional investors appear to have more concern for directors' competence or networking. [source] | ||||||||||