Title: Investor Type and Financial Market Anomalies: A Comparison of Individual, Institutional and Foreign Investors and Role of Their Behaviors in Investing Decisions
Abstract: The basic purpose of this paper is to identify the relationship and link between investor behavior and financial market anomalies. The literature reveals that institutional investors and foreign investors outperform individual investors and local investors due to the advantage of institutional investor sophistication. Additionally, the actions of individual investors are considered as contrarian indicators by the institutional investors. This conceptual framework enhances the knowledge and information for the understanding of the stock market's ups and downs in their shares and providing the awareness for such kind of sudden and unpredictable changes and behavior of the stock markets based on the individual investor behavior and institutional investor behavior as well as on the basis of domestic and foreign investor behavior. The paper also explains that either mentioned investor behaviors have a direct or indirect impact of stock market change or the change compels the investor to behave in specific ways. The paper explains that an individual investor performs poorly as compared to institutional investors because of having less information and sophistication. Individual investor behavior, as identified in most of the research findings, is the reason of the existence of stock market anomalies. The most compelling factors behind stock market anomalies are investor overconfidence, overreaction, overestimation, investor biased behavior and investor's less sophistication level. Therefore it may be inferred that investor behavior forms stork market anomalies. Another finding of the research is that local investors are feeling frustrated to invest in the stock markets due to irrationality and lack of information. Thus institutional and foreign investors are playing well and maximizing their wealth.
Publication Year: 2013
Publication Date: 2013-01-01
Language: en
Type: article
Access and Citation
Cited By Count: 5
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