Market Timing and Selectivity in Feedback Trading : Retail vs. Institutional Funds

다국어 초록 (Multilingual Abstract)

This study compares the differences in equity fund investment between retail and institutional investors by developing a new empirical feedback model. First, we find that retail investors engage in positive feedback trading for market timing and selectivity. Second, positive feedback trading for market timing of retail investors is due to sell-side trades. Positive feedback trading for selectivity is generated by a combined effect of both sell- and buy-side trades. Third, there is limited evidence of overconfidence in equity mutual funds. Fourth, we fail to find any indirect evidence of disposition effect from both investors. Finally, attribution bias affects positive feedback trading of retail investors, and they apply feedback trading for market timing and selectivity according to market conditions.

목차 (Table of Contents)

• Abstract
• 1. Introduction
• 2. Data and Sample Funds
• 2.1 Retail vs. institutional funds
• 2.2 Sample funds and descriptive statistics
• 3. An Empirical Feedback Trading Model
• 3.1 Decomposing feedback trading
• 3.2 Vector autoregressive (VAR) models
• 4. Empirical Evidence of Feedback Trading Behavior
• 4.1 Feedback trading for market timing and selectivity
• 4.2 Feedback trading, overconfidence, and the disposition effect
• 4.3 Attribution bias: self-enhancing bias and self-protective bias
• 5. Feedback Trading in Different Market Conditions
• 6. Concluding Remarks
• References