Retail Bubble Riders

48 Pages Posted: 7 Jun 2022 Last revised: 29 Jan 2023

See all articles by Prachi Deuskar

Prachi Deuskar

Indian School of Business

Shubham Upadhyay

Independent

Darya Yuferova

Norwegian School of Economics (NHH) - Department of Finance

Date Written: November 7, 2022

Abstract

We investigate the behavior of retail traders during repeated bubble episodes using detailed data from the Bombay Stock Exchange. We show that, after controlling for attrition, retail traders are more likely to participate in bubble stocks if they have prior bubble experience. Retail traders making extreme profits in the previous bubble episodes are less prone to engaging in future bubble riding. Moving from extreme profits to extreme losses in the previous bubble episodes monotonically increases the likelihood of future bubble participation. This pattern is consistent with the break-even effect observed in the context of prospect theory preferences.

Keywords: Bubbles, Retail traders, Break-even effect

JEL Classification: G12, G14

Suggested Citation

Deuskar, Prachi and Upadhyay, Shubham and Yuferova, Darya, Retail Bubble Riders (November 7, 2022). Indian School of Business WP, Available at SSRN: https://ssrn.com/abstract=4121534 or http://dx.doi.org/10.2139/ssrn.4121534

Prachi Deuskar

Indian School of Business ( email )

Hyderabad, Gachibowli 500 019
India

Shubham Upadhyay

Independent ( email )

India

Darya Yuferova (Contact Author)

Norwegian School of Economics (NHH) - Department of Finance ( email )

Helleveien 30
N-5045 Bergen
Norway

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