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

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  • Chae, Joon
  • Yang, Cheol-Won
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    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.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0927538X12000534
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    Bibliographic Info

    Article provided by Elsevier in its journal Pacific-Basin Finance Journal.

    Volume (Year): 21 (2013)
    Issue (Month): 1 ()
    Pages: 1008-1023

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    Handle: RePEc:eee:pacfin:v:21:y:2013:i:1:p:1008-1023

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    Web page: http://www.elsevier.com/locate/pacfin

    Related research

    Keywords: Commonality; Individual trading; Stock return; Predictability; Liquidity;

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