Are Individual or Institutional Investors the Agents of ‎Bubbles?‎

43 Pages Posted: 17 Mar 2012 Last revised: 6 Aug 2016

See all articles by Jongmoo Jay Choi

Jongmoo Jay Choi

Temple University; National Bureau of Economic Research (NBER); Temple University - International Business

Haim Kedar-Levy

Ben Gurion University of the Negev - Guilford Glazer Faculty of Business and Management

Sean Sehyun Yoo

Belmont University - College of Business Administration

Date Written: July 17, 2015

Abstract

Behavioral bubble models typically assume that uninformed trend-chasers, presumably individual investors, cause bubbles, while informed contrarian investors such as institutions trade against bubbles. DeLong et al. (1990a) highlight that to be considered a 'bubble', the mis-pricing must prevail in a large, diversified portfolio. To meet this criterion, we use a unique dataset of all transactions by investor type for all non-financial Korean firms, and find evidence at odds with such assumptions. Domestic individual investors systematically apply aggressive contrarian trades, while foreign and some domestic institutions are mostly trend-chasers. These findings suggest that institutional investors rather than individuals are agents of bubbles.

Keywords: trend-chasing, contrarian, behavioral bubbles, individual vs. institutional investors, foreign ‎investors

JEL Classification: G11, G15‎

Suggested Citation

Choi, Jongmoo Jay and Kedar-Levy, Haim and Yoo, Sean Sehyun, Are Individual or Institutional Investors the Agents of ‎Bubbles?‎ (July 17, 2015). Journal of International Money and Finance 59 (2015) 1–22. Available at SSRN: https://ssrn.com/abstract=2023766 or http://dx.doi.org/10.2139/ssrn.2023766

Jongmoo Jay Choi

Temple University ( email )

Fox School of Business
Temple University
Philadelphia, PA 19122
United States
215-204-5084 (Phone)
215-204-1697 (Fax)

HOME PAGE: http://astro.temple.edu/~jjchoi

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Temple University - International Business ( email )

Philadelphia, PA 19122
United States

Haim Kedar-Levy (Contact Author)

Ben Gurion University of the Negev - Guilford Glazer Faculty of Business and Management ( email )

P.O. Box 653
Beer-Sheva 84105
Israel
(972) 8 6472569 (Phone)
(972) 8 6477697 (Fax)

Sean Sehyun Yoo

Belmont University - College of Business Administration ( email )

United States

Register to save articles to
your library

Register

Paper statistics

Downloads
271
Abstract Views
3,250
rank
112,364
PlumX Metrics