TO SELL OR NOT TO SELL? BEHAVIOR OF SHAREHOLDERS DURING PRICE COLLAPSES

Bertrand M. Roehner ()
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Bertrand M. Roehner: L.P.T.H.E., University Paris 7, 2 place Jussieu, 75005 Paris, France

International Journal of Modern Physics C (IJMPC), 2001, vol. 12, issue 01, 43-53

Abstract: It is a common belief that the behavior of shareholders depends upon the direction of price fluctuations: if prices increase they buy, if prices decrease they sell. That belief, however, is more based on "common sense" than on facts. In this paper, we present evidence for a specific class of shareholders which shows that the actual behavior of shareholders can be markedly different. For instance, they may continue to buy despite a prolonged fall in prices or they may sell even though prices climb. A closer analysis shows that a substantial proportion of investors are more influenced by the "general social climate" than by actual price changes. The percentage of speculative investors who optimize their portfolio on a monthly basis can be estimated and turns out to be about 5 to 10%. The results presented in this paper can be of usefulness in order to test the assumptions or the results of market simulations and models.

Keywords: Stock Prices; Supply and Demand; Equity Funds; Inflow-Outflow (search for similar items in EconPapers)
Date: 2001
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DOI: 10.1142/S0129183101001390

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