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Individual investor trading and stock returns after the Covid-19 pandemic: Evidence from Korea

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  • Kwak, Jun Hee

Abstract

This paper reveals a significant attenuation in the previously observed positive association between individual investors’ purchases and stock returns following the Covid-19 pandemic. To investigate these changes, I utilize a comprehensive dataset of daily stock transactions, categorized by investor groups, from the Korean main board market. By employing a difference-in-difference regression model, I find that stocks influenced by the influx of amateur investors or attention-based trading post-pandemic are the key drivers behind this transformation. These findings suggest that policymakers might need to consider implementing systematic liquidity provision programs, such as market-making activities, to fill the liquidity gap created by individual investors.

Suggested Citation

  • Kwak, Jun Hee, 2024. "Individual investor trading and stock returns after the Covid-19 pandemic: Evidence from Korea," Finance Research Letters, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:finlet:v:61:y:2024:i:c:s1544612324000576
    DOI: 10.1016/j.frl.2024.105027
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    More about this item

    Keywords

    Stock return; Individual investor; Covid-19 pandemic; Contrarian trading; Amateur investor;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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