NDLI: Do Individual Investors Consciously Speculate on Reversals? Evidence from Leveraged Warrant Trading

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Do Individual Investors Consciously Speculate on Reversals? Evidence from Leveraged Warrant Trading

Content Provider	Scilit
Author	Farkas, Miklos Vvradi, Kata
Copyright Year	2017
Description	Journal: SSRN Electronic Journal Using proprietary data on bank-issued knock-out warrants, we find that individual investors, on aggregate, bet on price reversals. In a simple model we demonstrate that a mechanical channel due to market and product characteristics may account for investors' betting on reversals, even if investors' purchasing and selling decisions are independent of past returns. Our empirical results suggest that the mechanical channel can explain almost one half of the association between past returns and individual investors' order flow, while the rest can be attributed to the disposition effect, that is, investors' higher propensity to sell assets from their portfolios that have appreciated.
Related Links	http://unipub.lib.uni-corvinus.hu/3303/1/3090559.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=3090559
ISSN	10914358
e-ISSN	15565068
DOI	10.2139/ssrn.3090559
Journal	SSRN Electronic Journal
Language	English
Publisher	Elsevier BV
Publisher Date	2017-12-20
Access Restriction	Open
Subject Keyword	Journal: SSRN Electronic Journal Individual Investor Behavior Disposition Effect Leveraged Warrant Trading Price Reversal Speculation
Content Type	Text
Resource Type	Article
Subject	Public Health, Environmental and Occupational Health Psychiatry and Mental Health

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