Investor heterogeneity: Price momentum and trading volume reactions of foreign listed firms

dc.contributor.advisorAybar, Bulent
dc.contributor.authorZhang, Yan
dc.contributor.committeeMemberSamii, Massood
dc.contributor.committeeMemberFicici, Aysun
dc.contributor.committeeMemberDhakar, Tej
dc.description.abstractInvestor homogeneity is an important assumption in the efficient market hypothesis. However, viewing the financial markets from the eye of a professional trader, they are never efficient. Financial markets are composed of heterogeneous investors with the aims of speculation. Due to the large gap between theory and reality, many anomalies often occur. Price momentum as one of the commonly seen anomalies attracts the most attention from both scholars and practitioners. Prior finance literature documents that momentum is caused by investors’ differential beliefs or investor heterogeneity. Recognizing the importance of investor heterogeneity prompts scholars to incorporate it into asset pricing models, but they face a series of challenges. The objective of this study is to address the current challenges of quantifying and testing predictions on investor heterogeneity. By analyzing investors’ compositions, I argue that foreign listed firms are natural habitats of diverse investors. Compared with pure US firms, foreign listed firms provide perfect market venues to study investor heterogeneity. Using stock data of 2,200 NYSE and NASDAQ firms from 2000 to 2017, I classified them into higher/low order foreign listed firms and pure US firms. Momentum is tested by the Winner and Loser strategy, while trading volume is modeled by a regression of absolute return on volume turnover. This study finds that the three groups of firms have long term momentum in decreasing order, and investor heterogeneity plays an important role in price momentum. From phenomenon to essence, this study constructs a novel paradigm to quantify and forecast investor heterogeneity. It is also the first study to investigate the microstructural explanation of momentum and trading volume, and to state the relationship between liquidity and heterogeneity. The “Two Period Order Flow Model” and the “Heterogeneous Market Hypothesis(HMH)” also have important implications and contributions in both academics and industry. The conclusions of this research can benefit professional traders and option strategists in designing their trading strategies; it can help researchers avoid using proxied variables to quantify investor heterogeneity, build heterogeneous asset pricing models and create theoretical foundations for technical analysis; the HMH is also an alternative theory in challenging the EMH; and it can also help regulators better understand the financial markets. (Author abstract)en_US
dc.description.bibliographicCitationZhang, Y. (2018). Investor heterogeneity: Price momentum and trading volume reactions of foreign listed firms. Retrieved from
dc.description.degreeDoctor of Business Administration (D.B.A.)en_US
dc.description.programInternational Businessen_US
dc.description.schoolSchool of Businessen_US
dc.publisherSouthern New Hampshire Universityen_US
dc.relation.requiresAdobe Acrobat Readeren_US
dc.rightsAuthor retains all ownership rights. Further reproduction in violation of copyright is prohibiteden_US
dc.rightsHolderZhang, Yan
dc.subject.lcshSouthern New Hampshire University -- Theses (International Business)en_US
dc.subject.otherbusiness administrationen_US
dc.subject.otherforeign listed firmsen_US
dc.subject.otherHeterogeneous Market Hypothesisen_US
dc.subject.otherinvestor heterogeneityen_US
dc.subject.othermarket microstructureen_US
dc.subject.othertwo-period order flow modelen_US
dc.titleInvestor heterogeneity: Price momentum and trading volume reactions of foreign listed firmsen_US
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