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Do the Portfolios of Small Investors Reflect Positive Feedback Trading?

Published online by Cambridge University Press:  06 April 2009

Mary M. Bange
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Extract

This study examines the stock market forecasts and portfolio allocation decisions of small individual investors, based on survey data for 1987–1994. When investors are bullish, they increase their equity holdings; when investors are bearish, they decrease equity holdings. The surveyed investors are unable to time the stock market successfully. However, the shifts in their portfolios reflect past market movements and are consistent with positive feedback trading.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 35 , Issue 2 , June 2000 , pp. 239 - 255
Copyright
Copyright © School of Business Administration, University of Washington 2000

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Footnotes

*

Darla Moore School of Business, University of South Carolina, Columbia, SC, 29208. I thank numerous collagues for comments, including Tyrone Callahan, Werner De Bondt, Diane Del Guercio, Jim Granato, Todd Houge, Paul Malatesta (the editor), Mike Mazzeo, Tom Miller, Ted Moore, Greg Niehaus, Eric Schorvitz, and Mark Carhart (the referee). This was presented at the 1998 Financial Management meeting and the 1999 Western Finance Association meeting. I am grateful to Leigh Riddick, The Economist magazine, and Paul Garverick and Marie Zwick from the American Association of Individual Investors for providing data. The usual caveat applies.

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