Who Are the Market Beaters: Lucky Investors, Insiders or Who Else?
Yıl: 2018 Cilt: 9 Sayı: 1 Sayfa Aralığı: 87 - 107 Metin Dili: İngilizce DOI: 10.20409/berj.2018.95 İndeks Tarihi: 16-09-2019
Who Are the Market Beaters: Lucky Investors, Insiders or Who Else?
Öz: Conditions of beating the market is always top of the interests of investors throughout the history. In this study we aim to find who beats the market using a special trade and portfolio data from a stock exchange namely Borsa İstanbul. Instead of market data, investor based data used in this paper provides us to make stronger analyses. We initially find that 87% of individual and 92% of institutional investors get returns in a random way. Then the rest of investors are investigated to determine who consistently beats the market and gets abnormal returns. And we mainly find that the market beating gets longer with increasing portfolio size and diversification, while it gets shorter with increasing turnover. Additionally, longer beating length means higher shares of women, old adults, funds and foreigner. Furthermore, we analyze the return performance of investors in our study and show that the picture becomes reversed compared to beating length criteria. Finally, the insiders are compared with other investors to understand whether the market is efficient in the strong form or not. And the findings indicate that the insiders cannot be specifically differentiated from other investors. Therefore, we end up with the evidence that there is strong form efficiency in Borsa İstanbul.
Anahtar Kelime: Konular:
Belge Türü: Makale Makale Türü: Araştırma Makalesi Erişim Türü: Erişime Açık
- We define market beaters (beatens) as the group of investors who over-perform (under-perform) the market. That is, investors who have positive (negative) adjusted return are called as market beaters (beatens). Although the term of beater is generally used in the literature, the terms such as loser, underperformer, fool are preferred instead of beatens. In this study, the term of beaten has been intentionally chosen due to its simplicity and addition of originality.
- We mean by “run” is the sequence of successive adjusted returns with same sign. Suppose we have following Daily adjusted returns: 0.02, 0.05, -0.01, -0.02, 0.01, -0.02, -0.03, -0.01, 0.03. Signs of these returns generate the sequence: + + - - + - - - + which contains four positive and two negative runs.
- We define an investor as an inefficient if his/her result of runs test is not significant in 5% significance level, i.e., if |z|>1.96.
- It is a fact that formal normality tests always reject on the huge sample sizes we work with today. It's even easy to prove that when n gets large, even the smallest deviation from perfect normality will lead to a significant result. As n gets larger, skewness and kurtosis become less important - and directed tests are likely to detect if these quantities deviate from 0 even by a small amount.
- Since we could not find any significant change, we prefer to present the results by separating the investors in just two districts: Marmara and Other.
- During the period of our study Individual investors that capture 21% of the market capitalization. Also, 84% of largest shareholders are institutional investors. If we consider only stocks from BİST100 Index, then this ratio increases to more than 90%.
- Barber, B. M., & Odean, T. (2000). Trading is hazardous to your wealth: The common stock investment performance of individual investors. The Journal of Finance, 55(2), 773-806.
- Barber, B. M., & Odean, T. (2001). Boys will be boys: Gender, overconfidence, and common stock investment. The Quarterly Journal of Economics, 116(1), 261-292.
- Barber, B. M., Lee, Y. T., Liu, Y. J., & Odean, T. (2009). Just how much do individual investors lose by trading?. The Review of Financial Studies, 22(2).
- Basu, S. (1977). Investment performance of common stocks in relation to their price-earnings ratios: A test of the efficient market hypothesis. The Journal of Finance, 32(3), 663-682.
- Bauer, R., Cosemans, M., & Eichholtz, P. (2007). The performance and persistence of individual investors: Rational agents or tulip maniacs. In EFA 2007 Ljubljana Meetings Paper.
- Borges, M. R. (2010). Efficient market hypothesis in European stock markets. The European Journal of Finance, 16(7), 711-726.
- Brown, S. J., Goetzmann, W., Ibbotson, R. G., & Ross, S. A. (1992). Survivorship bias in performance studies. The Review of Financial Studies, 5(4), 553-580.
- Chaudhuri, S. K. (1991). Short-run Share Price Behaviour: New Evidence on Weak Form of Market Efficiency. Vikalpa, 16(4), 17-21.
- Coval, J. D., Hirshleifer, D. A., & Shumway, T. (2005). Can individual investors beat the market?. Working paper, University of Michigan.
- Dahlquist, M., Martinez, J. V., & Söderlind, P. (2016). Individual investor activity and performance. The Review of Financial Studies, 30(3), 866-899.
- Damodaran, A. (2012). Investment valuation: Tools and techniques for determining the value of any asset (Vol. 666). John Wiley & Sons.
- Del Brio, E. B., Miguel, A., & Perote, J. (2002). An investigation of insider trading profits in the Spanish stock market. The Quarterly Review of Economics and Finance, 42(1), 73-94.
- Fama, E. F. (1991). Efficient capital markets: II. The Journal of Finance, 46(5), 1575-1617.
- Fama, E. F. (1995). Random walks in stock market prices. Financial Analysts Journal, 51(1), 75-80.
- Ferris, S. P., Haugen, R. A., & Makhija, A. K. (1988). Predicting contemporary volume with historic volume at differential price levels: Evidence supporting the disposition effect. The Journal of Finance, 43(3), 677-697.
- Grinblatt, M., & Keloharju, M. (2000). The investment behavior and performance of various investor types: a study of Finland's unique data set. Journal of Financial Economics, 55(1), 43-67.
- Grinblatt, M., & Keloharju, M. (2001). How distance, language, and culture influence stockholdings and trades. The Journal of Finance, 56(3), 1053-1073.
- Korniotis, G. M., & Kumar, A. (2011). Do older investors make better investment decisions?. The Review of Economics and Statistics, 93(1), 244-265.
- Lehmann, B. N., & Modest, D. M. (1987). Mutual fund performance evaluation: A comparison of benchmarks and benchmark comparisons. The Journal of Finance, 42(2), 233-265.
- Malkiel, B. G., & Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. The Journal of Finance, 25(2), 383-417.
- Maury, B., & Pajuste, A. (2005). Multiple large shareholders and firm value. Journal of Banking & Finance, 29(7), 1813-1834.
- Odean, T. (1998). Are investors reluctant to realize their losses?. The Journal of Finance, 53(5), 1775-1798.
- Odean, T. (1999). Do investors trade too much?. American Economic Review, 89(5), 1279-1298.
- Pagano, M., & Roell, A. (1998). The choice of stock ownership structure: agency costs, monitoring, and the decision to go public. Quarterly Journal of Economics, 187-225.
- Peikun, Y. U., & Yutao, C. W. J. L. W. (2009). Can Institutional Investors Beat Individual Investors?. Journal of Financial Research, 8, 015.
- Poshakwale, S. (1996). Evidence on weak form efficiency and day of the week effect in the Indian stock market. Finance India, 10(3), 605-616.
- Statman, M. (2011). Efficient markets in crisis. Journal of Investment Management, 9(2), 4-13.
- Sheskin, D.J. (2000). Handbook of parametric and nonparametric statistical procedures. Second Edition. Chapman and Hall, Florida, USA.
- Tahaoglu, C., & Guner, Z. N. (2011). An investigation of returns to insider transactions: Evidence from the Istanbul Stock Exchange. Bogazici Journal, Review of Social, Economic and Administrative Studies, 25(1), 57-77.
- Thadewald, T., & Büning, H. (2007). Jarque–Bera test and its competitors for testing normality–a power comparison. Journal of Applied Statistics, 34(1), 87-105.
- Van Horne, J. C., Blume, M. E., & Friend, I. (1975). The asset structure of individual portfolios and some implications for utility functions. The Journal of Finance, 30(2), 585-603.
- Wald, A., & Wolfowitz, J. (1940). On a test whether two samples are from the same population. The Annals of Mathematical Statistics, 11(2), 147-162.
- Wermers, R. (1997). Momentum investment strategies of mutual funds, performance persistence, and survivorship bias. Unpublished Working Paper, University of Colorado.
| APA | VARLI Y (2018). Who Are the Market Beaters: Lucky Investors, Insiders or Who Else?. , 87 - 107. 10.20409/berj.2018.95 |
| Chicago | VARLI Y usuf Who Are the Market Beaters: Lucky Investors, Insiders or Who Else?. (2018): 87 - 107. 10.20409/berj.2018.95 |
| MLA | VARLI Y usuf Who Are the Market Beaters: Lucky Investors, Insiders or Who Else?. , 2018, ss.87 - 107. 10.20409/berj.2018.95 |
| AMA | VARLI Y Who Are the Market Beaters: Lucky Investors, Insiders or Who Else?. . 2018; 87 - 107. 10.20409/berj.2018.95 |
| Vancouver | VARLI Y Who Are the Market Beaters: Lucky Investors, Insiders or Who Else?. . 2018; 87 - 107. 10.20409/berj.2018.95 |
| IEEE | VARLI Y "Who Are the Market Beaters: Lucky Investors, Insiders or Who Else?." , ss.87 - 107, 2018. 10.20409/berj.2018.95 |
| ISNAD | VARLI, Y usuf. "Who Are the Market Beaters: Lucky Investors, Insiders or Who Else?". (2018), 87-107. https://doi.org/10.20409/berj.2018.95 |
| APA | VARLI Y (2018). Who Are the Market Beaters: Lucky Investors, Insiders or Who Else?. İşletme ve Ekonomi Araştırmaları Dergisi, 9(1), 87 - 107. 10.20409/berj.2018.95 |
| Chicago | VARLI Y usuf Who Are the Market Beaters: Lucky Investors, Insiders or Who Else?. İşletme ve Ekonomi Araştırmaları Dergisi 9, no.1 (2018): 87 - 107. 10.20409/berj.2018.95 |
| MLA | VARLI Y usuf Who Are the Market Beaters: Lucky Investors, Insiders or Who Else?. İşletme ve Ekonomi Araştırmaları Dergisi, vol.9, no.1, 2018, ss.87 - 107. 10.20409/berj.2018.95 |
| AMA | VARLI Y Who Are the Market Beaters: Lucky Investors, Insiders or Who Else?. İşletme ve Ekonomi Araştırmaları Dergisi. 2018; 9(1): 87 - 107. 10.20409/berj.2018.95 |
| Vancouver | VARLI Y Who Are the Market Beaters: Lucky Investors, Insiders or Who Else?. İşletme ve Ekonomi Araştırmaları Dergisi. 2018; 9(1): 87 - 107. 10.20409/berj.2018.95 |
| IEEE | VARLI Y "Who Are the Market Beaters: Lucky Investors, Insiders or Who Else?." İşletme ve Ekonomi Araştırmaları Dergisi, 9, ss.87 - 107, 2018. 10.20409/berj.2018.95 |
| ISNAD | VARLI, Y usuf. "Who Are the Market Beaters: Lucky Investors, Insiders or Who Else?". İşletme ve Ekonomi Araştırmaları Dergisi 9/1 (2018), 87-107. https://doi.org/10.20409/berj.2018.95 |
