News Release

Individual trading positively related to future returns

Peer-Reviewed Publication

Wiley

Durham, N.C. – June 25, 2008 – A new study in the Journal of Finance reveals that individual trading is positively associated with future short-horizon returns. Documenting a pattern for individual investor trading in the U.S., researchers show that prices go up in the month after intense buying by individuals and go down after intense selling by individuals.

Ron Kaniel, PhD, of Duke University, Gideon Saar of Cornell University, and Sheridan Titman of the University of Texas at Austin, examined the trading activity of individuals using a data set provided by the New York Stock Exchange.

The study documented excess returns in the month following intense buying by individuals and negative excess returns after individuals sell. Results also found that the trades of individuals can be used to forecast future returns. Stocks experience statistically significant excess returns of 0.80% in the 20 days following a week of intense buying by individuals and 0.33% following a week of intense individual selling.

The authors conclude that "these results, which suggest that individual investors implicitly provide liquidity to institutional investors, highlights the importance of better understanding the roles played by different market participants."

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This study is published in the Journal of Finance. Media wishing to receive a PDF of this article may contact journalnews@bos.blackwellpublishing.net.

Ron Kaniel, PhD, is affiliated with Duke University and can be reached for questions at ron.kaniel@duke.edu.

The Journal of Finance publishes leading research across all the major fields of financial research. It is the most widely cited academic journal on finance. Each issue of the journal reaches over 8,000 academics, finance professionals, libraries, government and financial institutions around the world.

Wiley-Blackwell was formed in February 2007 as a result of the acquisition of Blackwell Publishing Ltd. by John Wiley & Sons, Inc., and its merger with Wiley's Scientific, Technical, and Medical business. Together, the companies have created a global publishing business with deep strength in every major academic and professional field. Wiley-Blackwell publishes approximately 1,400 scholarly peer-reviewed journals and an extensive collection of books with global appeal. For more information on Wiley-Blackwell, please visit www.blackwellpublishing.com or http://interscience.wiley.com.


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