Trading Behavior Of Investors Research Articles

Effect of Perceived Technology Acceptance on Online Stock Trading Behavior: An Empirical Analysis

This study investigates the influence of perceived technology acceptance on the online stock trading behavior of retail investors. The objective of this research is to examine the predictors of online stock trading behavior and their impact. Using a regression model, the findings reveal that perceived usefulness, perceived ease of use, and perceived benefit significantly contribute to and promote online stock trading behavior. The standardized coefficients indicate a strong positive relationship between perceived usefulness (β = 0.838), perceived ease of use (β = 0.727), and perceived benefit (β = 0.783) with online stock trading behavior. The results suggest that retail investors are more inclined to engage in online stock trading when they perceive technology as useful, easy to use, and beneficial. This study underscores the pivotal role of technological applications in shaping the behavior of retail investors in the online stock trading environment, shedding light on the factors that drive participation in this increasingly digitized investment landscape.

Are investors attentive before a one-off holiday?

PurposeThis study investigates investor trading behaviour around regular and one-off public holidays on the Sydney Stock Exchange (SSX) from 1901 to 1950. The purpose is to examine whether trading patterns differ between regular holidays, which are known in advance, and one-off holidays, which are unexpected. The study provides insights into the predictability of holidays and its influence on market activity, contributing to the broader literature on investor inattention and market anomalies.Design/methodology/approachUsing a novel dataset constructed from handwritten share price lists covering 14,224 trading days, we perform quantitative analysis to assess trading volume before and after regular and one-off public holidays. Ordinary least squares regression models are employed to identify the presence of a holiday effect, accounting for various fixed effects and time-varying factors such as geopolitical events.FindingsWe find that trading volume is significantly lower on the day before regular holidays and higher on the day after, consistent with the investor inattention hypothesis. In contrast, no significant holiday effect is observed for one-off holidays. This suggests that predictability plays a crucial role in influencing investor behaviour, with irregular, less predictable holidays having less impact on trading patterns.Research limitations/implicationsThe study is limited by the historical nature of the data, which may not fully capture the diversity of modern trading environments. Additionally, the analysis is restricted to the SSX and may not be generalisable to other markets or time periods. Future research could explore similar effects in different contexts or with more recent data.Practical implicationsThis research provides valuable insights for market participants and regulators by demonstrating how the predictability of holidays influences market activity. Understanding these patterns could help in making more informed decisions during periods of expected low trading volumes.Social implicationsThe study underscores the role of public holidays in shaping investor behaviour, with broader implications for understanding how societal events influence financial markets. This is particularly relevant in discussions about the impact of unexpected events on market stability.Originality/valueThis is the first study to compare the effects of regular and one-off public holidays on trading volumes in a historical stock market context. Our findings highlight the importance of event predictability in financial markets, offering a new perspective on how historical market behaviours can inform current financial theories.

Manipulating stock prices based on insider information

Purpose This paper aims to investigate the trading behavior of insider investors before and after information releases, identifying information-based manipulation in the stock market and the characteristics of companies whose stock prices are manipulated. Design/methodology/approach This paper employs logit regression method and an event study approach, utilizing hand-collected data from 2010 to 2022, with information categorized into negative and positive types. Findings The results show no evidence of insider trading or negative information-based manipulation in both high and low transparency firms. However, in highly transparent companies, the Board of Directors (BOD) avoids direct manipulation by using relatives to evade market supervisors. In low transparency companies, both the BOD and family members (FM) exploit positive information to benefit personally by buying shares before releasing favorable news, causing a sharp stock increase, and selling afterward. Continued buying by the BOD and FM also suggests likely positive news announcements. Practical implications The characteristics of information-based manipulation in companies, as provided by this study, help individual investors avoid investing in stocks that are highly susceptible to manipulation. Originality/value Empirical research on information-based manipulation is scarce due to limited secondary data. Our study uses transaction data from insider investors in a frontier market with low transparency and high information asymmetry. This enables us to analyze information-based stock price manipulation. We identify manipulation by comparing insiders' trading behavior with their market information releases, resulting in stock price fluctuations greater than 5%.

The Impact of the New Normal Era on Investor Trading Behavior: Evidence from the IDX Capital Market School, Central Kalimantan Province, Indonesia

The Impact of the New Normal Era on Investor Trading Behavior: Evidence from the IDX Capital Market School, Central Kalimantan Province, Indonesia

Can stock trading suspension calm down investors during market crises?

We examine the trading behavior of investors facing a large number of firm-initiated stock trading suspension events during the Chinese stock market crisis in July 2015. Using account-level trading data from the Shanghai Stock Exchange, we find that investors with a higher fraction of holding value in suspension sell less (or purchase more) of non-suspended stocks. Consequently, non-suspended stocks whose shareholders have a high average account-level suspension fraction experience a short-term relative price appreciation. This evidence indicates that trading suspension can calm down investors and therefore help to stabilize the volatile market during crises.

Tax avoidance news, investor behavior, and stock market performance

This study investigates the relationship between tax avoidance news, investor behavior, and stock market performance in the Chinese financial context. Leveraging a comprehensive dataset spanning 2020–2023, we employ regression analyses and robustness tests to examine the impact of tax avoidance news on stock market performance. This quantitative empirical study addresses a significant gap in our understanding of the financial implications of tax avoidance news in China, highlighting its substantial influence on investor decisions and market dynamics. Key findings indicate that tax avoidance news leads to increased stock price volatility, moderated by investor trading behavior. This research contributes to the literature on taxation and financial markets by offering practical insights for policymakers, investors, and corporate entities. By understanding these dynamics, stakeholders can better navigate the complexities of financial markets and enhance corporate transparency and governance. The findings underscore the importance of effective communication and ethical practices in mitigating adverse market reactions, potentially influencing regulatory reforms and investment strategies.

Retail and Institutional Investor Trading Behaviors: Evidence from China

We study two important questions regarding trading dynamics in China: How do retail and institutional investors trade, and what are the underlying factors for these behaviors? Different from the United States, China's stock market has two prominent features: dominance of retail investors and active participation by the government. After reviewing nearly 100 previous studies, we reach three conclusions. First, there are substantial heterogeneity in retail investors. Small retail investors have low financial literacy, exhibit behavioral biases, and not surprisingly, negatively predict future returns, whereas large retail investors and institutions are capable of processing information and positively predict future returns. Second, the macro- and firm-level information environment in China is slowly but gradually improving, which greatly affects trading behaviors of different investors, especially the more sophisticated institutional investors and large retail investors. Finally, the Chinese government actively adjusts their regulations on the stock market to serve the dual goals of growth and stability. Many regulations are effective, while some may generate unintended consequences.

Asymmetric trading restriction and return comovement

This study decomposes the overall return comovement into intraday and overnight comovement based on a model-free framework. It shows that intraday return comovement contributes the most to the overall return comovement, but the impact of overnight return comovement is persistent. Investors under the market with asymmetric trading restrictions (ATR) tend to sell stocks early in the market and buy them near the end of the market. This correlated trading behavior contributes to the specific comovement in stock returns, especially the overnight return. Our findings remain solid even after controlling for more stock attributes and changing the proxies for return comovement and investor trading behavior. We also document a weakening (reinforcing) effect of the short-selling mechanism (disposition effect) on the ATR-induced return comovement. Our results provide a deeper understanding of investors’ trading behavior under ultra-short-term trading restrictions and the source of return comovement in the literature.

Momentum trading: How it differs among investor segments

ABSTRACT This study explores the momentum trading behaviours across different investor segments in the Turkish stock market. The empirical analysis confirms the positive return of the momentum strategy both in absolute terms and relative to the market benchmark, and the results support distinctive trading patterns among different investor segments. Specifically, foreign investors follow momentum trading, while domestic individuals lean towards contrarian trading. Further analysis shows that domestic individual investors exhibit a propensity to sell stocks with unrealised capital gains and to increase holdings of stocks with unrealised capital loss consistent with the disposition effect. Nevertheless, the trading behaviour of domestic individual investors could not be explained solely by the disposition effect. In contrast, foreign investors increase ownership share in stocks with unrealised capital gains but their momentum trading behaviour is confirmed even after controlling for disposition effect. These findings contribute to the broader understanding of investor trading behaviour within an emerging market context and provide valuable insights into the applicability of results from developed markets.

Corporate SDG performance and investor trading behavior

This paper employs a novel sustainability rating from Robeco to examine the response of investors to firms’ SDG performance. We explore the underlying mechanism from the perspective of corporate reputation and financial performance. Our finding suggests that better SDG performance leads to a net outflow of funds, especially from individual investors. Such implication may be due to the existence of greenwashing behaviors by management, as firms’ sustainability performance in the society dimension significantly improves its reputation, but not its financial performance. Furthermore, the negative impact of SDG performance on individual investors’ fund flows becomes markedly pronounced in state-owned, heavily polluting, Northwest region enterprises and after the introduction of the “dual carbon” targets.

Wealthy individual investors and stock markets' tail risk.

This paper employs a unique data set to analyze the trading behavior of wealthy individual investors across Mainland China and their impact on Chinese stock markets' tail risk. Results show that the wealthy individual investors' trading behavior can explain Chinese stock markets' tail risk, and the daily investment portfolios based on the network density of wealthy individual investors have significant excess returns. This paper also investigates the determinants of wealthy individual investors' trading behavior with the social network method and the spatial econometric model, and reveals that wealthy individuals benefit from the spillover effect of their trading behavior through the investor networks. The results of this paper not only reveal micro evidence for the formation mechanism of asset prices, but also provide insight into the behavior of wealthy individual investors.

Heterogeneous trading behaviors of individual investors: A deep clustering approach

While individual investors may have more diverse preferences and trading behavior than institutional investors due to their lack of professional education, many studies tend to lump individual investors together or classify them by socio-demographic characteristics. We conducted an empirical study using account-level trading data for over 300,000 investors in the Korean stock market from 2016 to 2020 to analyze the heterogeneity of individual investors. Our findings reveal notable disparities in profit distributions among the clusters formed based on investors' trading behavior. Therefore, this study emphasizes the importance of exploring the heterogeneity of individual investors to understand their behavior better.

Heterogeneity of foreign investors and Knightian uncertainty: Evidence from the Chinese capital market

Foreign investors are playing an increasingly important role in China's capital market, and the impact of northbound funds on Knightian uncertainty has attracted much academic attention. Based on the characteristics of northbound funds' trading behavior and investors' shareholding stability, this study divides them into long-term investors and short-term opportunists. It also examines the effect of long- and short-term foreign investors on individual stock Knightian uncertainty. The study finds that higher stability of northbound fund shareholding lowers the Knightian uncertainty of individual stocks, and long-term foreign institutional investors contribute to market stability. Furthermore, long-term investments in northbound funds can reduce Knightian uncertainty by improving the information environment, influencing the trading behavior of institutional investors, boosting investor confidence, and helping investors form consistent expectations. In conclusion, short-term foreign investors aggravate market volatility, whereas long-term foreign institutional investors help stabilize the market.

Does corporate digital transformation affect investor trading behaviour? – A perspective based on investor divergence

ABSTRACT This paper takes A-share listed companies during 2010–2021 as the research object, and finds that the digital transformation (DT) of enterprises affects investors’ trading behaviours; more specifically, the digital transformation of enterprises increases investor divergence. This paper also finds that external governance factors mitigate the impact of digital transformation on investor divergence; specifically, analyst tracking mitigates the impact of digital transformation on investor divergence by alleviating information asymmetry. As more professional investors, institutional investors have stronger information mining and analysis capabilities, so the impact of digital transformation on investor divergence could also be mitigated with the increase in the proportion of institutional investors. The intermediary mechanism test suggests that corporate digital transformation triggers investor divergence by increasing surplus volatility. Further research finds that, firstly, different approaches to digital transformation have different impacts, with digital transformation through self-developed technology being more likely to trigger investor divergence. Secondly, different firm natures have different impacts, with the digital transformation of non-high-tech firms having relatively greater impacts on investor divergence. Finally, the digital transformation of non-state-owned enterprises has greater impact on investor analysis.

Foreign trade and China’s yield curve during the COVID-19 pandemic: An analysis based on an extended arbitrage-free Nelson–Siegel model

We propose a general extension of the arbitrage-free Nelson–Siegel (AFNS) model by incorporating exogenous factors into the unspanned AFNS model. Regarding the number of people newly diagnosed with COVID-19 as an exogenous shock and net foreign purchases of treasury bonds of different maturities as unspanned factors, we study the impacts of the COVID-19 pandemic and the trading behavior of foreign investors on the yield curve in China. Our empirical results show that the COVID-19 pandemic significantly increases net foreign purchases of short-to-medium-term treasury bonds while significantly reducing the long-term treasury yield. Net foreign purchases of treasury bonds of different maturities cause large shifts with different shapes in the yield curve and have different effects on the excess returns of bonds of different maturities. This paper provides an important reference for risk management, investment decision-making and risk assessment of China’s financial opening policy for its treasury bond market.

Exploring the Influence of Post-Earnings Announcement Drift and Investor Sentiments on Investor Trading Behavior: A Qualitative Analysis

"Post-Earnings-Announcement Drift" is a market phenomenon, which refers to investors’ tendency to overreact to the earnings announcements in conducting their investment decisions. However, this effect shows up gradually over the whole period that stock of the company is being sold out following a bullet earnings surprise. Form radically different treatments from the efficient market hypothesis (EMH), where prices of stocks will be able to quickly and fully adjust to any new coming information, it takes time for the drift to reveal itself. This happens as a slow and eventual process. This research study investigates the impact of investor sentiments and post earnings announcements drift on investor trading behavior within the Pakistan stock market context. Twelve participants that comprises of institutional and individual investors, were selected using the convenience sampling methods. Semi-structured interviews were conducted to explore the fluctuations in stock prices, investment strategies, and the market conditions. NVivo software was employed to analyze the interview transcripts, revealing themes related to the fundamental analysis, dividend importance, decision-making strategies, sources of information, investor sentiments, earnings announcements, stock pricing, information leakage, and the market anomalies. The findings highlight the significance of both the rational analysis and emotional responses in investment decisions, the importance of timely earnings disclosures, and the presence of market anomalies and the information leakage.

Is macroeconomic tail risk contagious to stock idiosyncratic risk?

We explore whether macroeconomic tail risk (MTR) is contagious at the individual stock level. We find that macroeconomic tail risk exacerbates stock idiosyncratic volatility. An increase in macroeconomic tail risk by one standard deviation is associated with an average increase in idiosyncratic volatility by 5.10%. Further, divergence of opinion intensifies the macro to stock idiosyncratic risk contagion. Results show that the positive impact of macroeconomic tail risk on idiosyncratic volatility is only observed in assets with positive MTR beta, indicating that risk-averse hedging trading behavior of investors during macroeconomic downturns is the potential reason for the macro-individual risk contagion.

Mobile device use and the ranking effect on trading behavior: Evidence from natural experiments

This paper investigates how the trading behavior of investors using mobile devices differs from that of investors using PCs in the context of limited attention. We hypothesize that mobile device-based trading is associated with a stronger “ranking effect” that investors disproportionally trade top-ranked stocks. By exploiting the exogeneity of the return-based ranking of price limit events, we examine the ranking effect on retail investors' buying behavior and find supportive evidence that (1) based on the absolute returns of price limit events, top-ranked stocks are more heavily bought than the lower ranks by investors using mobile devices, while there is no significant ranking effect for investors using PCs; and (2) the ranking effect is enhanced with the increase of the number of contemporaneous price limit events.

Trading behavior by foreign and domestic investors

Purpose- Momentum, a well-known anomaly in financial markets, has garnered considerable attention from both academicians and market participants due to its implications for the market efficiency hypothesis and investment plans of investors. While momentum trading can yield excess returns, it is not a possible strategy for all investors because if one segment of investors employs a momentum trading strategy to profit from their trades, it requires another type of investor to take the opposite position to clear the market. Methodology- I investigate the momentum trading behavior of investors in different segments of Borsa İstanbul. Specifically, I focus on the momentum trading behavior among local and foreign investors and private and institutional investors. Findings- The results show that foreign investors’ stock holdings are positively associated with past returns inferring momentum trading while domestic investors are contrarians. Further analysis of domestic investors’ investing strategies reveals that the contrarian trading of domestic investors is mainly driven by individual investors. Conclusion- The results show that foreign investors’ stock holdings are positively associated with past returns inferring momentum trading while domestic investors are contrarians. Also, the contrarian trading of domestic investors is mainly driven by indvidual investors. Keywords: Momentum trading, investor behavior, foreign investor, domestic investor, panel data JEL Codes: G40, G11, G14

The momentum ambiguity and investor trading behavior

This paper investigates the impact of momentum ambiguity on investor trading behavior. Specifically, our findings suggest that in the presence of momentum (reversal) effects in asset returns, investors’ demand for the risky asset comprises myopic, hedging, and speculative components. Due to the opposite signs of hedging and speculative demands, the relationship between total demand and momentum effects may display a non-monotonic trend. The introduction of momentum uncertainty leads investors to adopt a more conservative approach, and in some cases, abstain from trading the risky asset altogether. Additionally, we observe heterogeneity in the impact of momentum and reversal uncertainty levels on investor demand.