The Trading Response of Individual Investors to Local Bankruptcies
Publikation: Working paper › Forskning
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The Trading Response of Individual Investors to Local Bankruptcies. / Laudenbach, Christine; Loos, Benjamin; Pirschel, Jenny; Wohlfart, Johannes.
2020.Publikation: Working paper › Forskning
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TY - UNPB
T1 - The Trading Response of Individual Investors to Local Bankruptcies
AU - Laudenbach, Christine
AU - Loos, Benjamin
AU - Pirschel, Jenny
AU - Wohlfart, Johannes
PY - 2020/4/23
Y1 - 2020/4/23
N2 - We use data from a German online brokerage and a survey to show that retail investors sharply reduce risk-taking in response to nearby firm bankruptcies, which are not predictive of returns. The effects on trading are spatially highly concentrated, immediate and not persistent. They seem to operate through more pessimistic expected returns and increased risk aversion and do not reflect wealth effects or changes in background risks. Investors learn about bankruptcies through immediate coverage in local newspapers. Our findings suggest that non-informative local experiences that make downside risks of stock investment more salient contribute to idiosyncratic short-term fluctuations in trading.
AB - We use data from a German online brokerage and a survey to show that retail investors sharply reduce risk-taking in response to nearby firm bankruptcies, which are not predictive of returns. The effects on trading are spatially highly concentrated, immediate and not persistent. They seem to operate through more pessimistic expected returns and increased risk aversion and do not reflect wealth effects or changes in background risks. Investors learn about bankruptcies through immediate coverage in local newspapers. Our findings suggest that non-informative local experiences that make downside risks of stock investment more salient contribute to idiosyncratic short-term fluctuations in trading.
KW - Individual Investors
KW - Risk-Taking
KW - Trading
KW - Experiences
U2 - 10.2139/ssrn.3559402
DO - 10.2139/ssrn.3559402
M3 - Working paper
T3 - CEBI Working Paper Series
BT - The Trading Response of Individual Investors to Local Bankruptcies
ER -
ID: 248802761