Liquidity provision and informed trading by individual investors

Xiao Tian, Binh Huu Do, Huu Nhan Duong, Petko Stefanov Kalev

    Research output: Contribution to journalArticleResearchpeer-review

    8 Citations (Scopus)

    Abstract

    This study examines the relation between individual investor trading and future stock returns in the Australian equity market. We find that the net trading of Australian individual investors is positively related to future returns. We show that this association is driven by individual investors who play the role as liquidity providers. We further document that the proliferation of algorithmic trading in recent years dampens the relation between individual trading and future returns. Finally, we present evidence that the net individual trading prior to earnings announcements predicts post-announcement returns. This prediction, however, is only observed for individual investors using full-service brokers.
    Original languageEnglish
    Pages (from-to)143 - 162
    Number of pages20
    JournalPacific Basin Finance Journal
    Volume35
    DOIs
    Publication statusPublished - 2015

    Cite this

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    title = "Liquidity provision and informed trading by individual investors",
    abstract = "This study examines the relation between individual investor trading and future stock returns in the Australian equity market. We find that the net trading of Australian individual investors is positively related to future returns. We show that this association is driven by individual investors who play the role as liquidity providers. We further document that the proliferation of algorithmic trading in recent years dampens the relation between individual trading and future returns. Finally, we present evidence that the net individual trading prior to earnings announcements predicts post-announcement returns. This prediction, however, is only observed for individual investors using full-service brokers.",
    author = "Xiao Tian and Do, {Binh Huu} and Duong, {Huu Nhan} and Kalev, {Petko Stefanov}",
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    language = "English",
    volume = "35",
    pages = "143 -- 162",
    journal = "Pacific Basin Finance Journal",
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    Liquidity provision and informed trading by individual investors. / Tian, Xiao; Do, Binh Huu; Duong, Huu Nhan; Kalev, Petko Stefanov.

    In: Pacific Basin Finance Journal, Vol. 35, 2015, p. 143 - 162.

    Research output: Contribution to journalArticleResearchpeer-review

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    AU - Duong, Huu Nhan

    AU - Kalev, Petko Stefanov

    PY - 2015

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    N2 - This study examines the relation between individual investor trading and future stock returns in the Australian equity market. We find that the net trading of Australian individual investors is positively related to future returns. We show that this association is driven by individual investors who play the role as liquidity providers. We further document that the proliferation of algorithmic trading in recent years dampens the relation between individual trading and future returns. Finally, we present evidence that the net individual trading prior to earnings announcements predicts post-announcement returns. This prediction, however, is only observed for individual investors using full-service brokers.

    AB - This study examines the relation between individual investor trading and future stock returns in the Australian equity market. We find that the net trading of Australian individual investors is positively related to future returns. We show that this association is driven by individual investors who play the role as liquidity providers. We further document that the proliferation of algorithmic trading in recent years dampens the relation between individual trading and future returns. Finally, we present evidence that the net individual trading prior to earnings announcements predicts post-announcement returns. This prediction, however, is only observed for individual investors using full-service brokers.

    U2 - 10.1016/j.pacfin.2014.11.005

    DO - 10.1016/j.pacfin.2014.11.005

    M3 - Article

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    SP - 143

    EP - 162

    JO - Pacific Basin Finance Journal

    JF - Pacific Basin Finance Journal

    SN - 0927-538X

    ER -