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Buyers versus Sellers: Who Initiates Trades, and When?

Published online by Cambridge University Press:  16 December 2016

Tarun Chordia ,
Amit Goyal  and
Narasimhan Jegadeesh
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Abstract

Models that examine investors’ motivations to trade often make opposite predictions about the relation between trading decisions and past returns. We find that, in the aggregate, both buyer- and seller-initiated trades increase with past returns. The difference between buyer- and seller-initiated trades is negatively related to short horizon returns but positively related to returns over longer horizons. Tax-loss-related seller-initiated trades in December and January are accompanied by increased buyer-initiated trades. Past returns significantly affect trading decisions, and these findings are consistent with a number of different models of trading behavior.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 51 , Issue 5 , October 2016 , pp. 1467 - 1490
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2016 

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