Advanced Search
MyIDEAS: Login to save this paper or follow this series

Individual investors and volatility

Contents:

Author Info

  • Foucault, Thierry

    ()

  • Themar, David

    ()

  • Sraer, David

    ()

Abstract

In this paper, the authors test the hypothesis that individual investors contribute to the idiosyncratic volatility of stock returns because they act as noise traders.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.hec.fr/var/fre/storage/original/application/bbd5e898998b30e0d01ef3903e457b34.pdf
Download Restriction: no

Bibliographic Info

Paper provided by HEC Paris in its series Les Cahiers de Recherche with number 899.

as in new window
Length: 45 pages
Date of creation: 01 Jul 2008
Date of revision:
Handle: RePEc:ebg:heccah:0899

Contact details of provider:
Postal: HEC Paris, 78351 Jouy-en-Josas cedex, France
Web page: http://www.hec.fr/
More information through EDIRC

Related research

Keywords: Idiosyncratic volatility; Retail investors; Noise trading;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Artyom Durnev & Randall Morck & Bernard Yeung & Paul Zarowin, 2003. "Does Greater Firm-Specific Return Variation Mean More or Less Informed Stock Pricing?," Journal of Accounting Research, Wiley Blackwell, Wiley Blackwell, vol. 41(5), pages 797-836, December.
  2. Andrade, Sandro C. & Chang, Charles & Seasholes, Mark S., 2008. "Trading imbalances, predictable reversals, and cross-stock price pressure," Journal of Financial Economics, Elsevier, Elsevier, vol. 88(2), pages 406-423, May.
  3. Solnik, Bruno, 1990. " The Distribution of Daily Stock Returns and Settlement Procedures: The Paris Bourse," Journal of Finance, American Finance Association, American Finance Association, vol. 45(5), pages 1601-09, December.
  4. Daniel Dorn & Gur Huberman & Paul Sengmueller, 2008. "Correlated Trading and Returns," Journal of Finance, American Finance Association, American Finance Association, vol. 63(2), pages 885-920, 04.
  5. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
  6. Andrea Frazzini & Owen A. Lamont, 2005. "Dumb Money: Mutual Fund Flows and the Cross-Section of Stock Returns," NBER Working Papers 11526, National Bureau of Economic Research, Inc.
  7. Frank M. Song & Junxi Zhang, 2005. "Securities Transaction Tax and Market Volatility," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(506), pages 1103-1120, October.
  8. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(4), pages 703-38, August.
  9. Dow, J. & Rahi, R., 1997. "Should Speculators be Taxed?," Economics Working Papers, European University Institute eco97/21, European University Institute.
  10. Jones, Charles M & Seguin, Paul J, 1997. "Transaction Costs and Price Volatility: Evidence from Commission Deregulation," American Economic Review, American Economic Association, American Economic Association, vol. 87(4), pages 728-37, September.
  11. Subrahmanyam, Avanidhar, 1998. "Transaction Taxes and Financial Market Equilibrium," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 71(1), pages 81-118, January.
  12. Soeren Hvidkjaer, 2008. "Small Trades and the Cross-Section of Stock Returns," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 21(3), pages 1123-1151, May.
  13. Baker, Malcolm & Savasoglu, Serkan, 2002. "Limited arbitrage in mergers and acquisitions," Journal of Financial Economics, Elsevier, Elsevier, vol. 64(1), pages 91-115, April.
  14. Allen, Franklin & Gale, Douglas, 1994. "Limited Market Participation and Volatility of Asset Prices," American Economic Review, American Economic Association, American Economic Association, vol. 84(4), pages 933-55, September.
  15. Guillermo Llorente & Roni Michaely & Gideon Saar & Jiang Wang, 2002. "Dynamic Volume-Return Relation of Individual Stocks," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 15(4), pages 1005-1047.
  16. Grinblatt, Mark & Keloharju, Matti, 2000. "The investment behavior and performance of various investor types: a study of Finland's unique data set," Journal of Financial Economics, Elsevier, Elsevier, vol. 55(1), pages 43-67, January.
  17. Kyle, Albert & Campbell, John, 1993. "Smart Money, Noise Trading and Stock Price Behaviour," Scholarly Articles 3208217, Harvard University Department of Economics.
  18. John Y. Campbell & Sanford J. Grossman & Jiang Wang, 1992. "Trading Volume and Serial Correlation in Stock Returns," NBER Working Papers 4193, National Bureau of Economic Research, Inc.
  19. Pontiff, Jeffrey, 2006. "Costly arbitrage and the myth of idiosyncratic risk," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 42(1-2), pages 35-52, October.
  20. Brad M. Barber & Terrance Odean, 2000. "Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors," Journal of Finance, American Finance Association, American Finance Association, vol. 55(2), pages 773-806, 04.
  21. Ron Kaniel & Gideon Saar & Sheridan Titman, 2008. "Individual Investor Trading and Stock Returns," Journal of Finance, American Finance Association, American Finance Association, vol. 63(1), pages 273-310, 02.
  22. Malkiel, Burton & Campbell, John & Lettau, Martin & Xu, Yexiao, 2001. "Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk," Scholarly Articles 3128707, Harvard University Department of Economics.
  23. Soeren Hvidkjaer, 2006. "A Trade-Based Analysis of Momentum," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 19(2), pages 457-491.
  24. Amihud, Yakov, 2002. "Illiquidity and stock returns: cross-section and time-series effects," Journal of Financial Markets, Elsevier, Elsevier, vol. 5(1), pages 31-56, January.
  25. Umlauf, Steven R., 1993. "Transaction taxes and the behavior of the Swedish stock market," Journal of Financial Economics, Elsevier, Elsevier, vol. 33(2), pages 227-240, April.
  26. Bruno Biais & Christophe Bisière & Jean‐Paul Décamps, 1999. "Short Sales Constraints, Liquidity and Price Discovery: An Empirical Analysis on the Paris Bourse," European Financial Management, European Financial Management Association, European Financial Management Association, vol. 5(3), pages 395-410.
  27. Richard K. Crump & V. Joseph Hotz & Guido W. Imbens & Oscar A. Mitnik, 2006. "Moving the Goalposts: Addressing Limited Overlap in the Estimation of Average Treatment Effects by Changing the Estimand," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0330, National Bureau of Economic Research, Inc.
  28. Scruggs, John T., 2007. "Noise trader risk: Evidence from the Siamese twins," Journal of Financial Markets, Elsevier, Elsevier, vol. 10(1), pages 76-105, February.
  29. Duffee, Gregory R., 1995. "Stock returns and volatility A firm-level analysis," Journal of Financial Economics, Elsevier, Elsevier, vol. 37(3), pages 399-420, March.
  30. Bessembinder, Hendrik & Venkataraman, Kumar, 2004. "Does an electronic stock exchange need an upstairs market?," Journal of Financial Economics, Elsevier, Elsevier, vol. 73(1), pages 3-36, July.
  31. Brad M. Barber & Terrance Odean, 2002. "Online Investors: Do the Slow Die First?," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 15(2), pages 455-488, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Bekaert, Geert & Hodrick, Robert J & Zhang, Xiaoyan, 2010. "Aggregate Idiosyncratic Volatility," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8149, C.E.P.R. Discussion Papers.
  2. Gunther CAPELLE-BLANCARD & HAVRYLCHYK, Olena, 2014. "The Impact of the French Securities Transaction Tax on Market Liquidity and Volatility," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 14007, Research Institute of Economy, Trade and Industry (RIETI).
  3. Orhan Erdem & Evren Arik & Serkan Yüksel, 2013. "Trading Puzzle, Puzzling Trade," Working Paper, Research and Business Development Department, Borsa Istanbul 05, Research and Business Development Department, Borsa Istanbul.
  4. Cheng, Su-Yin, 2012. "Substitution or complementary effects between banking and stock markets: Evidence from financial openness in Taiwan," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 22(3), pages 508-520.
  5. Patrick Roger, 2012. "Portfolio diversification dynamics of individual investors: a new measure of investor sentiment," Working Papers of LaRGE Research Center, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg 2012-01, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
  6. Mariusz Kicia, 2013. "Can Heuristic Valuation Improve Investment Performance Of Individual Investors?," Diversity, Technology, and Innovation for Operational Competitiveness: Proceedings of the 2013 International Conference on Technology Innovation and Industrial Management, ToKnowPress, ToKnowPress.
  7. Rawley Z Heimer, 2013. "Friends do let friends buy stocks actively," Working Paper, Federal Reserve Bank of Cleveland 1314, Federal Reserve Bank of Cleveland.
  8. Chen, Zhijuan & Lin, William T. & Ma, Changfeng & Tsai, Shih-Chuan, 2014. "Liquidity provisions by individual investor trading prior to dividend announcements: Evidence from Taiwan," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 28(C), pages 358-374.
  9. Patrick Roger & Marie-Hélène Broihanne & Maxime Merli, 2012. "In search of positive skewness: the case of individual investors," Working Papers of LaRGE Research Center, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg 2012-04, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
  10. Vozlyublennaia, Nadia, 2014. "Investor attention, index performance, and return predictability," Journal of Banking & Finance, Elsevier, Elsevier, vol. 41(C), pages 17-35.
  11. Dimpfl, Thomas & Jank, Stephan, 2011. "Can Internet search queries help to predict stock market volatility?," University of Tuebingen Working Papers in Economics and Finance, University of Tuebingen, Faculty of Economics and Social Sciences 18, University of Tuebingen, Faculty of Economics and Social Sciences.
  12. Amal Aouadi & Mohamed Arouri & Frédéric Teulon, 2014. "Investor Following and Volatility: A GARCH Approach," Working Papers, Department of Research, Ipag Business School 2014-286, Department of Research, Ipag Business School.
  13. Hoffmann, Arvid O.I. & Post, Thomas & Pennings, Joost M.E., 2013. "Individual investor perceptions and behavior during the financial crisis," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(1), pages 60-74.
  14. Greenwood, Robin & Thesmar, David, 2011. "Stock price fragility," Journal of Financial Economics, Elsevier, Elsevier, vol. 102(3), pages 471-490.
  15. Ralf Bergheim & Jürgen Ernstberger & Michael W.M. Roos, 2014. "How Do Fair Value Measurements of Financial Instruments Affect Investments in Banks?," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0487, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  16. Jung, Chan Shik & Kim, Woojin & Lee, Dong Wook, 2013. "Short selling by individual investors: Destabilizing or price discovering?," Pacific-Basin Finance Journal, Elsevier, Elsevier, vol. 21(1), pages 1232-1248.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ebg:heccah:0899. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sandra Dupouy).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.