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Buyers versus Sellers: Who Initiates Trades, and When?

Published online by Cambridge University Press:  16 December 2016

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
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2016 

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