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http://ssrn.com/abstract=1461855
 
 

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Investor Clienteles and Habitat-Based Return Comovements


Alok Kumar


University of Miami - School of Business Administration

Jeremy K. Page


Brigham Young University

Oliver G. Spalt


Tilburg University - Department of Finance

February 14, 2010

AFA 2011 Denver Meetings Paper

Abstract:     
This study investigates whether retail and institutional investors concentrate their trading among certain stock categories (i.e., habitats) and whether their trading activities generate return comovements among stocks within those habitats. Our results indicate that both retail and institutional investors are more likely to trade stocks with similar characteristics. Further, investors' trades are correlated with retail trades exhibiting stronger correlations. Using different measures of comovements, including geography- and price-based comovements, we demonstrate that correlated retail trading generates stronger comovement patterns while informed institutional trading weakens them. Comovements are stronger among stocks that have lottery features, are located in regions where people enjoy gambling, or are held by retail investors with strong gambling propensity. Across time, trading correlations and comovements are amplified during periods of greater market-level uncertainty and stronger consumer sentiment. Overall, these results are consistent with the habitat-based view of return comovements proposed in Barberis, Shleifer, and Wurgler (2005).

Number of Pages in PDF File: 66

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Date posted: August 27, 2009 ; Last revised: April 15, 2010

Suggested Citation

Kumar, Alok and Page, Jeremy K. and Spalt, Oliver G., Investor Clienteles and Habitat-Based Return Comovements (February 14, 2010). AFA 2011 Denver Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1461855 or http://dx.doi.org/10.2139/ssrn.1461855

Contact Information

Alok Kumar (Contact Author)
University of Miami - School of Business Administration ( email )
514 Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)
HOME PAGE: http://moya.bus.miami.edu/~akumar
Jeremy K. Page
Brigham Young University ( email )
Marriott School of Management
685 TNRB
Provo, UT 84602
United States
801-422-7173 (Phone)
HOME PAGE: http://marriottschool.byu.edu/directory/details?id=19364
Oliver G. Spalt
Tilburg University - Department of Finance ( email )
Department of Finance
Tilburg University
Tilburg, 5000 LE
Netherlands
+31 13 466 3545 (Phone)
HOME PAGE: http://www.oliverspalt.com
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References:  63
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