Individual investor trading and stock returns after the Covid-19 pandemic: Evidence from Korea

Jun Hee Kwak

Finance Research Letters, 2024, vol. 61, issue C

Abstract: This paper reveals a significant attenuation in the previously observed positive association between individual investors’ purchases and stock returns following the Covid-19 pandemic. To investigate these changes, I utilize a comprehensive dataset of daily stock transactions, categorized by investor groups, from the Korean main board market. By employing a difference-in-difference regression model, I find that stocks influenced by the influx of amateur investors or attention-based trading post-pandemic are the key drivers behind this transformation. These findings suggest that policymakers might need to consider implementing systematic liquidity provision programs, such as market-making activities, to fill the liquidity gap created by individual investors.

Keywords: Stock return; Individual investor; Covid-19 pandemic; Contrarian trading; Amateur investor (search for similar items in EconPapers)
JEL-codes: G12 G14 G41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:61:y:2024:i:c:s1544612324000576

DOI: 10.1016/j.frl.2024.105027

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