 Stock return anomalies and individual investors in the Korean stock marketJeewon Jang Pacific-Basin Finance Journal, 2017, vol. 46, issue PA, 141-157 Abstract: I find a negative cross-sectional relation between the probability of future price crashes and subsequent returns in the Korean stock market, substantially due to the overpricing of stocks with a high probability of crashes. Using precise information on retail trading in the Korean stock market, I also find that stocks with a high crash probability have a relatively high proportion of retail trading. Moreover, the negative relation between the probability of crashes and stock returns is much stronger in stocks traded more heavily by retail investors. However, I cannot find a negative relation between the probability of jackpot payoffs and subsequent returns in Korea, unlike in the United States, even among stocks with a high proportion of retail trading. Both portfolio- and firm-level evidence on the crash effect suggests that stocks with a higher retail trading proportion are more likely to be overpriced, as expected from the limits to arbitrage literature. Keywords: Anomalies; Crash; Overpricing; Retail investors; Limits to arbitrage (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:46:y:2017:i:pa:p:141-157 DOI: 10.1016/j.pacfin.2017.09.002 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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