Fool's Mate: What Does CHESS Tell Us About Individual Investor Trading Performance?

47 Pages Posted: 7 Oct 2015

See all articles by Reza Bradrania

Reza Bradrania

University of South Australia - UniSA Business School

Andrew R. Grant

University of Sydney Business School - Discipline of Finance; Financial Research Network (FIRN)

P. Joakim Westerholm

University of Sydney Business School

Wei Wu

The University of Sydney

Date Written: August 24, 2015

Abstract

We investigate the short-term relation between individual investor trading and stock returns on the Australian Securities Exchange. Stocks heavily bought by individual investors underperform stocks heavily sold over the subsequent three days, with respective returns on to a long-short portfolio of -93, -67 and -12 basis points on days one, two, and three. Individuals lose on their passive orders, except in large stocks, for which they lose on aggressive orders. Foreign institutions gain from taking the opposite side of individual trades. We present a liquidity-based explanation for the findings.

Keywords: Individual investors, institutional investors, short-term reversals, liquidity

JEL Classification: G14

Suggested Citation

Bradrania, Reza and Grant, Andrew R. and Westerholm, P. Joakim and Wu, Wei, Fool's Mate: What Does CHESS Tell Us About Individual Investor Trading Performance? (August 24, 2015). CIFR Paper No. 80/2015, Available at SSRN: https://ssrn.com/abstract=2670341 or http://dx.doi.org/10.2139/ssrn.2670341

Reza Bradrania

University of South Australia - UniSA Business School ( email )

Adelaide, South Australia 5001
Australia

Andrew R. Grant

University of Sydney Business School - Discipline of Finance ( email )

H69 Codrington Business School Building
Sydney, NSW 2006
Australia
61-2-9036-6238 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

P. Joakim Westerholm (Contact Author)

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Wei Wu

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

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