Is Experience the Teacher? An Analysis of Investor Behavior during the Market Crash
Date Issued
2009
Date
2009
Author(s)
Su, Yu-Hui
Abstract
Due to the global financial crisis in 2008, Taiwan weighted stock index plummeted 56% in 130 trading days, which caused investors suffered huge losses. To study how individual investors make disposition decisions for the stocks in hand during the market crash and how investors learn from prior market experiences, we use actual trading data provided by a securities firm in Taiwan to examine whether personal characteristics, trading types and investment experience make influences on individual investors’ trading behaviors.his paper finds that previous investment experiences make effects on individual investor''s investment behaviors during the market crash in 2008. In addition, investors with more trading experiences and similar experiences of the market crash incline to sell their stocks promptly, whereas inexperienced investors tend to hold stocks with paper losses or to purchase more stocks with the purpose to breakeven the sunk cost. In conclusion, our research finds that experiences help investors to reduce dramatic losses in the market crash, which is in line with the behavior of experienced investors in experimental asset markets literature.
Subjects
Market Crash
Individual Investor
Investment Experience
Learning Effect
Behavior Finance
Type
thesis
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