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

37 Pages Posted: 17 Dec 2017

See all articles by Reza Bradrania

Reza Bradrania

University of South Australia - UniSA Business School

Andrew R. Grant

University of Sydney - Discipline of Finance, Faculty of Economics and Business; Financial Research Network (FIRN)

P. Joakim Westerholm

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

Wei Wu

The University of Sydney

Multiple version iconThere are 2 versions of this paper

Date Written: December 2017

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 underperform in small and mid‐size stocks when they trade passively using limit orders waiting for the market price to move in their favour. Individuals underperform in large stocks when they trade aggressively using marketable orders. Foreign institutions gain from taking the opposite side of individual trades. We present an information asymmetry‐based explanation for the findings.

Keywords: Individual investors, Institutional investors, Information asymmetry, Liquidity

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? (December 2017). Accounting & Finance, Vol. 57, Issue 4, pp. 981-1017, 2017. Available at SSRN: https://ssrn.com/abstract=3088230 or http://dx.doi.org/10.1111/acfi.12180

Reza Bradrania (Contact Author)

University of South Australia - UniSA Business School ( email )

Adelaide, South Australia 5001
Australia

Andrew R. Grant

University of Sydney - Discipline of Finance, Faculty of Economics and Business ( email )

P.O. Box H58
Sydney, NSW 2006
Australia
61-2-9036-7991 (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

University of Sydney Business School ( email )

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

Financial Research Network (FIRN)

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

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

Wei Wu

The University of Sydney ( email )

University of Sydney
Sydney, NC NSW 2006
Australia

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