Buyers versus Sellers: Who Initiates Trades, and When?

Publisher: Cambridge University Press

E-ISSN: 1756-6916|51|5|1467-1490

ISSN: 0022-1090

Source: Journal of Financial and Quantitative Analysis, Vol.51, Iss.5, 2016-12, pp. : 1467-1490

Disclaimer: Any content in publications that violate the sovereignty, the constitution or regulations of the PRC is not accepted or approved by CNPIEC.

Previous Menu Next

Abstract

Models that examine investors’ motivations to trade often make opposite predictions about the relation between trading decisions and past returns. We find that, in the aggregate, both buyer- and seller-initiated trades increase with past returns. The difference between buyer- and seller-initiated trades is negatively related to short horizon returns but positively related to returns over longer horizons. Tax-loss-related seller-initiated trades in December and January are accompanied by increased buyer-initiated trades. Past returns significantly affect trading decisions, and these findings are consistent with a number of different models of trading behavior.