Buyers Versus Sellers: Who Initiates Trades and When?

45 Pages Posted: 23 Aug 2011 Last revised: 10 Mar 2015

See all articles by Tarun Chordia

Tarun Chordia

Emory University - Department of Finance

Amit Goyal

University of Lausanne; Swiss Finance Institute

Narasimhan Jegadeesh

Emory University - Department of Finance

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

Chordia, Tarun and Goyal, Amit and Jegadeesh, Narasimhan, Buyers Versus Sellers: Who Initiates Trades and When? (February 2015). Swiss Finance Institute Research Paper No. 11-43. Available at SSRN: https://ssrn.com/abstract=1914554 or http://dx.doi.org/10.2139/ssrn.1914554

Tarun Chordia

Emory University - Department of Finance ( email )

Atlanta, GA 30322-2710
United States
404-727-1620 (Phone)
404-727-5238 (Fax)

Amit Goyal (Contact Author)

University of Lausanne ( email )

Lausanne, Vaud CH-1015
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

Narasimhan Jegadeesh

Emory University - Department of Finance ( email )

Atlanta, GA 30322-2710
United States

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