Individual Investors' Trading Motives and Security Selling Behavior

57 Pages Posted: 14 Aug 2013 Last revised: 12 Jun 2015

See all articles by Benjamin Loos

Benjamin Loos

UTS Business School

Steffen Meyer

University of Southern Denmark - Department of Business and Economics; Danish Finance Institute

Joachim Weber

Goethe University Frankfurt - Department of Finance

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration; Goethe University Frankfurt - Research Center SAFE

Date Written: November 19, 2014

Abstract

Using a unique dataset of individual investors, we categorize their security sale transactions into liquidity sales (proceeds withdrawn from the sample bank), speculative sales (proceeds used to purchase other securities), and all other sales. Liquidity sales and speculative sales make up 12% and 20% of all transactions, respectively. The key question of this paper is does trade motivation affect trading behavior? The answer is yes. Heuristic criterions like the disposition effect and attention play a greater role when selling for liquidity reasons than for speculative sales. For mutual funds, this bears negatively on portfolio performance.

Keywords: inidividual investors, liquidity, behavioral biases, cash constraints

JEL Classification: D12, G11, G14

Suggested Citation

Loos, Benjamin and Meyer, Steffen and Weber, Joachim and Hackethal, Andreas, Individual Investors' Trading Motives and Security Selling Behavior (November 19, 2014). Available at SSRN: https://ssrn.com/abstract=2309382 or http://dx.doi.org/10.2139/ssrn.2309382

Benjamin Loos (Contact Author)

UTS Business School ( email )

Haymarket
Sydney, NSW 2007
Australia

Steffen Meyer

University of Southern Denmark - Department of Business and Economics ( email )

DK-5230 Odense
Denmark

Danish Finance Institute ( email )

Joachim Weber

Goethe University Frankfurt - Department of Finance ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno Platz 3
Frankfurt am Main, 60323
Germany

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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