Buyers Versus Sellers: Who Initiates Trades and When?
45 Pages Posted: 23 Aug 2011 Last revised: 10 Mar 2015
Date Written: February 2015
Models that examine investor’s motivations to trade often make opposite predictions about the relation between trading decisions and past returns. We find that, in the aggregate, both buyer- and seller-initiated trades increase with past returns. The difference between buyer- and seller-initiated trades is negatively related to short horizon returns but positively related to returns over longer horizons. Tax-loss related seller-initiated trades in December and January are accompanied by increased buyer-initiated trades. Past returns significantly affect trading decisions and these findings are consistent with a number of different models of trading behavior.
Keywords: Order imbalance, disposition effect, tax-loss selling
JEL Classification: G10, G12
Suggested Citation: Suggested Citation