The Aggregate Behaviour of Individual Investors

52 Pages Posted: 29 Apr 2004

See all articles by Andrew Jackson

Andrew Jackson

Vinva Investment Management; London Business School

Date Written: July 29, 2003


Behavioural models generally require that the investment decisions of irrational investors aggregate in a systematic way. Using a unique Australian dataset of individual investor trades I investigate the plausibility of this assumption. I find that aggregate individual investor trades do indeed exhibit strong systematic patterns, including negative feedback trading and substantial persistence. In addition the weekly cross-sectional net trades of a large number of independent retail brokerage firms are contemporaneously correlated to a remarkable extent. Thus the aggregation assumption appears plausible.

However I do not find that the net trades of retail investors consistently predict future returns in a negative fashion. In fact over the period 1991-2002, the net trades of full-service brokerage clients actually positively forecast future short-term market and cross-sectional returns. While small investors do act in a highly systematic fashion, their actions may not, at least in the short run, be classed as irrational.

Keywords: Individual Investors, Small Investors

Suggested Citation

Jackson, Andrew, The Aggregate Behaviour of Individual Investors (July 29, 2003). Available at SSRN: or

Andrew Jackson (Contact Author)

Vinva Investment Management ( email )

L13 10 Bridge Street
Sydney, 2000


London Business School ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

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