Commonality in individuals' trading: A systematic path between behavioral bias and expected returns

Joon Chae and Cheol-Won Yang

Pacific-Basin Finance Journal, 2013, vol. 21, issue 1, 1008-1023

Abstract: This paper investigates whether there is commonality in the trading of individual investors. To test for the existence of trading commonality, we apply three different methods employed in assessments of commonality in liquidity. Using actual individual trading in the Korean stock market, we demonstrate the strong commonality in individual trading. Additionally, we find evidence that commonality in individual trading predicts future stock returns, and its' predictability is significant in medium-size stocks. The Korean market also shows strong commonality in liquidity, but it has little relation to commonality in individual trading in explaining stock returns.

Keywords: Commonality; Individual trading; Stock return; Predictability; Liquidity (search for similar items in EconPapers)
JEL-codes: G02 G11 G12 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:21:y:2013:i:1:p:1008-1023

DOI: 10.1016/j.pacfin.2012.07.003

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