Abstract
Using a unique dataset of individual investors, we categorize their security sale transactions into liquidity sales (proceeds withdrawn from the sample bank), speculative sales (proceeds used to purchase other securities), and all other sales. Liquidity sales and speculative sales make up 12% and 20% of all transactions, respectively. The key question of this paper is does trade motivation affect trading behavior? The answer is yes. Heuristic criterions like the disposition effect and attention play a greater role when selling for liquidity reasons than for speculative sales. For mutual funds, this bears negatively on portfolio performance.
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