Retail investor expectations and trading preferences

Sarantis Tsiaplias, Qi Zeng and Guay Lim
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Qi Zeng: Department of Finance, the University of Melbourne

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: Using a novel quarterly survey of 23 thousand Australian retail equity investors spanning eight years, we study the relationship between investor beliefs and their trading preferences. We provide evidence that, consistent with Mean-Variance preferences, both lower returns and higher volatility increase the marginal propensity to sell. Furthermore, we find that while demographic characteristics and investment experiences are predictive of the holding preferences of retail investors, they are uninformative about their trading directional preferences (i.e. whether to buy or sell). Our findings suggest that a representative-agent portfolio model with Mean-Variance preferences is sufficient to explain the trading directional preferences of retail investors, but not their holding patterns.

Keywords: investor expectiations; shareholder surveys; trading preferences; Mean-Variance utility. (search for similar items in EconPapers)
JEL-codes: C35 G11 G40 (search for similar items in EconPapers)
Pages: 43pp
Date: 2021-12
New Economics Papers: this item is included in nep-cwa, nep-fmk, nep-ore and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2021n27

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