Burghardt Retail Investor Sentiment and Behavior

An Empirical Analysis
1. Auflage 2011
ISBN: 978-3-8349-6170-9
Verlag: Betriebswirtschaftlicher Verlag Gabler
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 158 Seiten, Web PDF

Reihe: Economics and Finance (R0)

Investor sentiment and behavior play an important role in financial markets. Using a unique data set consisting of more than 36.5 million submitted retail investor orders over the course of five years, Matthias Burghardt constructs an innovative retail investor sentiment index. He shows that retail investors’ trading decisions are correlated, that retail investors are contrarians, and that a profitable trading strategy can be based on these aggregated sentiment measures.

Zielgruppe

Research

Autoren/Hrsg.

Burghardt, Matthias

Inhaltsverzeichnis

1;Acknowledgements;6
2;Table of Contents;7
3;Abbreviations;10
4;List of Figures;12
5;List of Tables;13
6;1 Introduction;14
6.1;1.1. Motivation;14
6.2;1.2. Research Outline;15
6.3;1.3. Overview and Structure;20
6.4;1.4. Related Publications;21
7;2 Related Theoretical and Empirical Work;22
7.1;2.1. Introduction to Behavioral Finance;22
7.1.1;2.1.1. Are Financial Markets Efficient?;22
7.1.2;2.1.2. Challenges to Efficient Markets;24
7.1.3;2.1.3. Emergence of Behavioral Finance;26
7.2;2.2. Theoretical Work;29
7.3;2.3. Empirical Work;33
7.3.1;2.3.1. Noise Traders;33
7.3.2;2.3.2. Investor Sentiment;34
7.3.3;2.3.3. Individual Investors;34
7.3.4;2.3.4. Correlated Trading;35
7.4;2.4. Discussion;36
7.4.1;2.4.1. Behavioral Finance;36
7.4.2;2.4.2. Correlated Trading;37
7.4.3;2.4.3. Return Correlation;41
7.4.4;2.4.4. Market Efficiency;44
7.5;2.5. Conclusion;45
8;3 Investor Sentiment Construction;47
8.1;3.1. Classification of Sentiment Measures;47
8.1.1;3.1.1. Related Work;47
8.1.2;3.1.2. Advantages and Disadvantages;49
8.2;3.2. Sentiment Measures in Research;50
8.2.1;3.2.1. The Closed-End Funds Discount;50
8.2.2;3.2.2. Meta-Measures;53
8.3;3.3. Sentiment Measures in Practice;56
8.3.1;3.3.1. Survey-Based Measures;56
8.3.2;3.3.2. Market-Data-Based Measures;63
8.3.3;3.3.3. Meta-Measures;66
8.3.4;3.3.4. Summary Statistics;67
8.4;3.4. Evaluation of Sentiment Measures;69
8.4.1;3.4.1. Direct Sentiment Measures;69
8.4.2;3.4.2. Indirect Sentiment Measures;71
8.4.3;3.4.3. Direct vs. Indirect Sentiment Measures;73
8.4.4;3.4.4. Sentiment Measures vs. Market Returns;76
8.4.5;3.4.5. Review of Results;79
8.5;3.5. Conclusion;79
9;4 Construction of the Euwax Sentiment Index;81
9.1;4.1. Introduction;81
9.1.1;4.1.1. Securitized Derivatives;81
9.1.2;4.1.2. European Warrant Exchange;85
9.1.3;4.1.3. Key Facts;85
9.2;4.2. Data Set;86
9.3;4.3. Basic Index Calculation;88
9.4;4.4. Sentiment Analysis;92
9.4.1;4.4.1. Numbervs. Volume-Based Measures;92
9.4.2;4.4.2. Product Types;95
9.4.3;4.4.3. Order Types;95
9.4.4;4.4.4. Order Volume Groups;95
9.4.5;4.4.5. Submitted Orders;96
9.4.6;4.4.6. Leverage;97
9.5;4.5. Comparison with Other Sentiment Measures;98
9.5.1;4.5.1. Indirect Sentiment Measures;99
9.5.2;4.5.2. Direct Sentiment Measures;101
9.5.3;4.5.3. Review of Results;103
9.6;4.6. Conclusion;104
10;5 Retail Investor Herding;105
10.1;5.1. Introduction;105
10.2;5.2. Related Work;106
10.2.1;5.2.1. Definitions of Herding;106
10.2.2;5.2.2. Empirical Findings;107
10.2.3;5.2.3. Discussion;110
10.3;5.3. Evidence of Market-Wide Herding;112
10.3.1;5.3.1. Data;112
10.3.2;5.3.2. Herding Measure Construction;112
10.3.3;5.3.3. Results;113
10.3.4;5.3.4. Review of Results;117
10.4;5.4. Market-Wide Herding on a Broker Level;117
10.4.1;5.4.1. Data;117
10.4.2;5.4.2. Results;119
10.4.3;5.4.3. Review of Results;121
10.5;5.5. Stock-Level Herding;122
10.5.1;5.5.1. Data;122
10.5.2;5.5.2. Herding Measure;124
10.5.3;5.5.3. Results;126
10.5.4;5.5.4. Review of Results;128
10.6;5.6. Conclusion;129
11;6 The Predictive Power of Retail Investor Sentiment;131
11.1;6.1. Related Work;131
11.2;6.2. Data and Methodology;134
11.2.1;6.2.1. Data Set;135
11.2.2;6.2.2. Methodology;136
11.3;6.3. Results;137
11.3.1;6.3.1. Preand Post-Portfolio-Formation Returns;137
11.3.2;6.3.2. Control Variables;142
11.3.3;6.3.3. Portfolio Holding Returns;146
11.4;6.4. Robustness Checks;151
11.5;6.5. Conclusion;154
12;7 Conclusion and Future Work;155
12.1;7.1. Conclusion;155
12.2;7.2. Summary of Contributions;159
12.3;7.3. Future Work;160
13;Appendix;163
13.1;A Appendix to Chapter 4;163
14;Bibliography;165

Über Autor(innen)

Matthias Burghardt received a doctorate degree in business administration from the Karlsruhe Institute of Technology where he worked as a research fellow under the supervision of Prof. Dr. Christof Weinhardt at the Institute of Information Systems and Management. He currently works at a leading European exchange organization for retail investors.