Individuals’ Asymmetric Choice of Order-type Depending on the Previous Returns
Using all of individuals’ transactions on KSE over 1999-2009, I find the individuals’ asymmetric choice of order- type depending on the previous returns of stocks. Individuals holding winners prefer to sell them with market orders, and individuals holding losers prefer to sell them with limit orders...
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| Format: | Article |
| Language: | English |
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People & Global Business Association (P&GBA)
2018-06-01
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| Series: | Global Business and Finance Review |
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| Online Access: | http://www.gbfrjournal.org/pds/journal/thesis/20180710134910-2G3OQ.pdf |
| Summary: | Using all of individuals’ transactions on KSE over 1999-2009, I find the individuals’ asymmetric choice of order- type depending on the previous returns of stocks. Individuals holding winners prefer to sell them with market orders, and individuals holding losers prefer to sell them with limit orders. However, individuals willing to buy winners tend to use limit orders and individuals willing to buy losers tend to use market orders. Individuals’ order- type selections can be explained by the asymmetric change of their risk attitude depending on the previous stock performance, which is proposed by the Prospect theory. This tendency makes individuals engage in negative feedback trading in market trades and positive feedback trading in limit trades. |
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| ISSN: | 1088-6931 2384-1648 |