Modeling the dynamics of institutional, foreign, and individual investors through price consensus

Do-Gyun Kwon, Jang Ho Kim, Yongjae Lee and Woo Chang Kim

International Review of Financial Analysis, 2017, vol. 49, issue C, 166-175

Abstract: In this paper, we present a price consensus measure for understanding the dynamics among institutional, foreign, and individual investors. The proposed measure inversely estimates investors' daily views on the value of an asset, which incorporates the price consensus of the investor type. The price consensus measure is derived based on a rational expectation asset model and CARA utility function, and its effectiveness is empirically demonstrated by conducting cross-sectional analyses on historical trade data of the Korean stock market. These analyses demonstrate the advantage of using the price consensus measure when compared against modeling only net purchase amounts. Moreover, the findings show that institutional and foreign investors tend to have distinct long-term views while individual investors have views that are less extreme and thus showing characteristics of uninformed trades. Findings on short-term views exhibit information spillover from institutional and foreign investors to individuals.

Keywords: Price consensus; Inverse estimation; Investor type; Korea Exchange; Trading behavior (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521916301624
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:49:y:2017:i:c:p:166-175

DOI: 10.1016/j.irfa.2016.10.011

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().