Modeling the dynamics of institutional, foreign, and individual investors through price consensus

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In this paper, we present a price consensus measure for understanding the dynamics among institutional, foreign, and individual investors. The proposed measure inversely estimates investors' daily views on the value of an asset, which incorporates the price consensus of the investor type. The price consensus measure is derived based on a rational expectation asset model and CARA utility function, and its effectiveness is empirically demonstrated by conducting cross-sectional analyses on historical trade data of the Korean stock market. These analyses demonstrate the advantage of using the price consensus measure when compared against modeling only net purchase amounts. Moreover, the findings show that institutional and foreign investors tend to have distinct long-term views while individual investors have views that are less extreme and thus showing characteristics of uninformed trades. Findings on short-term views exhibit information spillover from institutional and foreign investors to individuals. (C) 2016 Elsevier Inc. All rights reserved.
Publisher
ELSEVIER SCIENCE INC
Issue Date
2017-01
Language
English
Article Type
Article
Keywords

PERFORMANCE; EXPERIENCE; BEHAVIOR; MARKETS

Citation

INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS, v.49, pp.166 - 175

ISSN
1057-5219
DOI
10.1016/j.irfa.2016.10.011
URI
http://hdl.handle.net/10203/223095
Appears in Collection
IE-Journal Papers(저널논문)
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