Buyers Versus Sellers: Who Initiates Trades and When?
45 Pages Posted: 23 Aug 2011 Last revised: 10 Mar 2015
Date Written: February 2015
Abstract
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
Swiss Finance Institute ( email )
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland
