What Drives Individual Investors in the Bear Market?

Xu, R.; Liu, Y.; Hu, N.; Guo, M.

Abstract

This study uses a unique dataset from a large anonymous brokerage firm to examine the net investment of individual investors during a bear market. The study’s empirical evidence reveals that individual investors provide liquidity by acting as net buyers. Particularly, male and younger investors tend to have a higher buying intensity than the others during the market downturn. Besides, better performances when the market crashed encourage investors to be overconfident, thus exhibiting self-attribution bias since we do not find similar results in the bull-market subsample. Results from the stock-level analysis imply that investors tend to buy stocks with worse short-term past performance, higher liquidity, and larger market capitalization. Our findings on the individual investor trading behaviour cannot be explained by either a superior stock-picking ability or a higher tendency to gamble during the market downswing.

Citation

Xu, R., Liu, Y., Hu, N., & Guo, M. (2022). What Drives Individual Investors in the Bear Market?. The British Accounting Review, 54(6), Article 101113. https://doi.org/10.1016/j.bar.2022.101113

• Journal Article Type: Article
• Acceptance Date: Jun 15, 2022
• Online Publication Date: Jun 21, 2022
• Publication Date: 2022-11
• Deposit Date: Jun 26, 2022
• Publicly Available Date: Jun 22, 2024
• Journal: The British Accounting Review
• Print ISSN: 0890-8389
• Electronic ISSN: 1095-8347
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 54
• Issue: 6
• Article Number: 101113
• DOI: https://doi.org/10.1016/j.bar.2022.101113
• Public URL: https://durham-repository.worktribe.com/output/1200100