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Fool's mate: What does CHESS tell us about individual investor trading performance?

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  • Reza Bradrania
  • Andrew Grant
  • Peter Joakim Westerholm
  • Wei Wu

Abstract

We investigate the short†term relation between individual investor trading and stock returns on the Australian Securities Exchange. Stocks heavily bought by individual investors underperform stocks heavily sold over the subsequent three days, with respective returns on to a long–short portfolio of −93, −67 and −12 basis points on days one, two and three. Individuals underperform in small and mid†size stocks when they trade passively using limit orders waiting for the market price to move in their favour. Individuals underperform in large stocks when they trade aggressively using marketable orders. Foreign institutions gain from taking the opposite side of individual trades. We present an information asymmetry†based explanation for the findings.

Suggested Citation

  • Reza Bradrania & Andrew Grant & Peter Joakim Westerholm & Wei Wu, 2017. "Fool's mate: What does CHESS tell us about individual investor trading performance?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(4), pages 981-1017, December.
    • Handle: RePEc:bla:acctfi:v:57:y:2017:i:4:p:981-1017
    DOI: 10.1111/acfi.12180
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    References listed on IDEAS

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    7. Le, Anh & Yin, Xiangkang & Zhao, Jing, 2019. "Informed trading around earnings announcements in Australia," Pacific-Basin Finance Journal, Elsevier, vol. 58(C).
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