The trading behavior and price impact of foreign, institutional, individual investors and government: Evidence from Korean equity market

Hong, Gwangheon; Lee, Bong Soo

doi:10.1016/j.japwor.2011.10.002

Cited by 22 publications

(36 citation statements)

References 26 publications

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“…This irrational trading of retail investors affects the relation between risk and risk compensation. Retail investors' trading has a dominant effect on the risk-return relation, especially in the Korean stock market (Hong, Lee 2011). Finally, retail investors' investment strategy does not fully reflect the risk-return trade-off, because their stock trading pattern is subject to personal bias.…”

Section: Introductionmentioning

confidence: 99%

Individual Mean-Variance Relation and Stock-Level Investor Sentiment

Kim

Seo

2017

Journal of Business Economics and Management

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This research studies the effect of stock-level investor sentiment on individual stock returns’ mean-variance relation. Using unique buy and sell volume data of retail investors in Korean stock market, we find that a positive mean-variance relation is undermined among high-sentiment stocks, but holds among low-sentiment stocks. We adopt buy-sell imbalances of retail investors for individual stocks as a measure of stock-level investor sentiment. Further, our findings provide empirical evidence of a strong riskreturn trade-off among stocks with low retail concentration (e.g., large capitalization, high-priced, and growth stocks). Existing research only analyzes market-wide investor sentiment. However, we study the effect of stock-level investor sentiment on individual stock returns. Therefore, our findings suggest novel implications about the investment strategy that the stock-level investor sentiment is important when constructing portfolios based on variance.

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Section: Introductionmentioning

confidence: 99%

Individual Mean-Variance Relation and Stock-Level Investor Sentiment

Kim

Seo

2017

Journal of Business Economics and Management

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“…First, many studies have examined the stocks and investment strategies preferred by institutional investors in contexts similar to that of herding [1,2,4,6,20,[24][25][26][27][28][29][30][31]. Grinblatt, Titman, and Wermers [25] showed that 77% of mutual funds are momentum traders who buy winners with past high returns and sell losers with past low returns.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Cai and Zheng [1] found that institutional investors buy stocks with positive returns over the past 12 months and sell stocks with negative returns. Hong and Lee [24] argued that institutional investors are driving the Korean stock market. They provided evidence that institutional investors perform better than individual investors and that institutional investors use a momentum strategy.…”

Section: Literature Reviewmentioning

confidence: 99%

“…While studies on the U.S. market focus on more than four quarters because of the limited available data, our study examines the anomalies within a year at a monthly frequency. Finally, while many studies [23,24] have examined the behavior and characteristics of institutional investors in the Korean stock market, our study differs from theirs in that we explore institutional trading in relation to stock return anomalies.…”

Section: Introductionmentioning

confidence: 99%

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Institutional Investors’ Trading Response to Stock Market Anomalies: Evidence from Korea

Kim

Park

2020

Sustainability

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This study examines whether institutions are sophisticated investors that exploit stock characteristics known to predict future returns in Korea, using data from 2000 to 2018. We analyze the institutional demand, measured as a change in institutional ownership, for stocks with eight well-known anomalies as well as the future abnormal returns of institutional trading. We find that, generally, institutions do not trade consistently with stock anomaly predictions because they are reluctant to hold both highly overvalued and highly undervalued stocks. Although they use a few anomalies, they use these characteristics passively to avoid stocks known to underperform rather than to pick stocks known to outperform. Furthermore, the positive returns on long-legs are concentrated on stocks sold by institutions, while the negative returns on short-legs are concentrated on stocks bought by them. Our finding casts doubt on the widely-accepted notion that institutions are skilled investors and that institutional arbitrage trading corrects any mispricing in the market. To the contrary, institutions’ loss-averse trading behaviors cause or magnify mispricing.

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“…Institutional investors are able to pressure executives by threatening to take their investment out of the firm in case the management is not willing to follow the institutional investor's way (Filatotchev and Toms 2006). A study on South Korea revealed that both foreigners and institutional investors performed well in the sample period, whereas individual investors performed poorly (Hong and Lee 2011). Also for other Asian countries, there is evidence that foreigners and institutional investors drive the equity market.…”

Section: Introductionmentioning

confidence: 99%

International Business Mergers and Acquisitions in Japan

Bebenroth¹

2015

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The trading behavior and price impact of foreign, institutional, individual investors and government: Evidence from Korean equity market

Cited by 22 publications

References 26 publications

Individual Mean-Variance Relation and Stock-Level Investor Sentiment

Individual Mean-Variance Relation and Stock-Level Investor Sentiment

Institutional Investors’ Trading Response to Stock Market Anomalies: Evidence from Korea

International Business Mergers and Acquisitions in Japan

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