Do individual traders undermine firm valuation?

Paul Moon Sub Choi, Joung Hwa Choi and Chune Young Chung

Finance Research Letters, 2020, vol. 36, issue C

Abstract: Studies find that noise traders create unhedgeable risks, and individuals have long been suspected of making suboptimal and uninformed trading decisions. Recent arguments suggest using the individual trading weight to proxy for noise trader risk when pricing common and preferred stocks in emerging markets. We empirically corroborate that individual traders undermine the relative valuations of listed firms in South Korea. This result is robust to controlling for corporate governance, institutional monitoring efforts, firm size, accounting ratios, idiosyncratic volatility, liquidity measures, and endogeneity.

Keywords: Noise trader risk; Individual trading weight; Firm valuation (search for similar items in EconPapers)
JEL-codes: G12 G15 G32 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:36:y:2020:i:c:s1544612319308463

DOI: 10.1016/j.frl.2020.101567

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