Purpose

This paper investigates individual investors' responses to stock underpricing and how their trading decisions are affected by analysts' forecasts and recommendations.

Design/methodology/approach

This empirical study uses mutual fund fire sales as an exogenous source that causes stock underpricing and analysts' forecasts and recommendations as price-correcting information. The study further uses regression analysis to examine individual investors' responses to fire sales and how their responses vary with price-correcting information.

Findings

The authors first show that individual investors respond to mutual fund fire sales by significantly decreasing net buys, and this effect appears to be prolonged. Next, the authors find that the decrease of net buys diminishes following analysts' price-correcting earnings forecast revisions and stock recommendation changes. Hence, the authors suggest that individual investors are not “wise” enough to recognize flow-driven underpricing; however, this response is weakened by analysts' price-correcting information.

Originality/value

There is an ongoing debate in the literature about whether individual investors should be portrayed as unsophisticated traders or informed traders who can predict future returns. The authors study a unique information event and provide new evidence related to both perspectives. Overall, our evidence suggests that the “unsophisticated traders” perspective is predominant, whereas a better information environment significantly reduces individual investors' information disadvantage. This finding could be of interest to both academic researchers and regulators.

中文翻译：

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个人投资者对共同基金抛售和卖方分析师价格修正修正的反应

目的

本文调查了个人投资者对股票抑价的反应，以及分析师的预测和建议如何影响他们的交易决策。

设计/方法/方法

本实证研究使用共同基金抛售作为导致股票抑价的外生来源，并将分析师的预测和建议作为价格修正信息。该研究进一步使用回归分析来检查个人投资者对抛售的反应以及他们的反应如何随价格修正信息而变化。

发现

作者首先表明，个人投资者通过显着减少净购买量来应对共同基金的抛售，而且这种影响似乎是长期存在的。接下来，作者发现，随着分析师的价格修正盈利预测修正和股票推荐变化，净购买量的减少会减少。因此，作者认为个人投资者不够“明智”，无法识别流量驱动的抑价；然而，分析师的价格修正信息削弱了这种反应。

原创性/价值

关于个人投资者是否应该被描述为不老练的交易者或可以预测未来回报的知情交易者，文献中一直存在争论。作者研究了一个独特的信息事件，并提供了与这两种观点相关的新证据。总体而言，我们的证据表明，“不成熟的交易者”观点占主导地位，而更好的信息环境显着降低了个人投资者的信息劣势。这一发现可能会引起学术研究人员和监管机构的兴趣。