Stock portfolio structure of individual investors infers future trading behavior

Ludvig Bohlin and Martin Rosvall

Papers from arXiv.org

Abstract: Although the understanding of and motivation behind individual trading behavior is an important puzzle in finance, little is known about the connection between an investor's portfolio structure and her trading behavior in practice. In this paper, we investigate the relation between what stocks investors hold, and what stocks they buy, and show that investors with similar portfolio structures to a great extent trade in a similar way. With data from the central register of shareholdings in Sweden, we model the market in a similarity network, by considering investors as nodes, connected with links representing portfolio similarity. From the network, we find groups of investors that not only identify different investment strategies, but also represent groups of individual investors trading in a similar way. These findings suggest that the stock portfolios of investors hold meaningful information, which could be used to earn a better understanding of stock market dynamics.

Date: 2014-02, Revised 2014-08
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Published in PLoS ONE (2014) 9(7): e103006

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1402.2494

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