Are individual or institutional investors the agents of bubbles?

Jongmoo Jay Choi, Haim Kedar-Levy and Sean Sehyun Yoo

Journal of International Money and Finance, 2015, vol. 59, issue C, 1-22

Abstract: Behavioral bubble models typically assume that uninformed trend-chasers, presumably individual investors, cause bubbles, while informed contrarian investors such as institutions, trade against bubbles. DeLong et al. (1990a) highlight that to be considered a “bubble”, the mis-pricing must prevail in a large, diversified portfolio. To meet this criterion, we use a unique dataset of all transactions by investor type for all non-financial Korean firms, and find evidence at odds with such assumptions. Domestic individual investors systematically apply aggressive contrarian trades, while foreign and some domestic institutions are mostly trend-chasers. These findings suggest that institutional investors rather than individuals are agents of bubbles.

Keywords: Foreign investors; Individual investors; Institutional investors; Trend-chasing; Contrarian; Behavioral bubbles (search for similar items in EconPapers)
JEL-codes: F3 G1 G2 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:59:y:2015:i:c:p:1-22

DOI: 10.1016/j.jimonfin.2015.09.004

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