Individual Investor Trading and Stock Returns

55 Pages Posted: 6 Oct 2004  

Ron Kaniel

University of Rochester - Simon Business School; CEPR

Gideon Saar

Cornell University - Samuel Curtis Johnson Graduate School of Management

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: December 2006

Abstract

This paper investigates the dynamic relation between net individual investor trading and short-horizon returns for a large cross-section of NYSE stocks. The evidence indicates that individuals tend to buy stocks following declines in the previous month and sell following price increases. We document positive excess returns in the month following intense buying by individuals and negative excess returns after individuals sell, which we show is distinct from the previously shown past return or volume effects. The patterns we document are consistent with the notion that risk-averse individuals provide liquidity to meet institutional demand for immediacy.

Keywords: Individual investor sentiment, return predictability, behavioral finance, liquidity provision, NYSE, contrarian, market efficiency

JEL Classification: G10, G14

Suggested Citation

Kaniel, Ron and Saar, Gideon and Titman, Sheridan, Individual Investor Trading and Stock Returns (December 2006). AFA 2005 Philadelphia Meetings; Johnson School Research Paper Series No. 13-06. Available at SSRN: https://ssrn.com/abstract=600084 or http://dx.doi.org/10.2139/ssrn.600084

Ron Kaniel

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

HOME PAGE: http://rkaniel.simon.rochester.edu

CEPR ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Gideon Saar (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

431 Sage Hall
Ithaca, NY 14853
United States
607-255-7484 (Phone)
607-255-5993 (Fax)

HOME PAGE: https://www.johnson.cornell.edu/Faculty-And-Research/Profile?id=gs25

Sheridan Titman

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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