Investor trading behavior and asset prices: Evidence from quantile regression analysis

Considering the behavior anomaly under both rising and falling market conditions, this paper aims to address whether the investor trading behavior is sensitive to a different quantile of stock return dispersions by using quantile regression model. Results show that investor trading behavior has significant impacts on different quantiles of stock return dispersions, and reveal the smile slope of investor trading behavior effect which is stronger at the extreme quantile distributions than the median distribution. Moreover, results evidence that the investor trading behavior effect with optimistic investor sentiment should be stronger than the investor trading behavior effect with pessimistic investor sentiment. Finally, this paper sheds light on the anchoring effect of investor trading behavior, and demonstrates that the anchor of investor trading behavior has a positive and significant impact on stock returns. These patterns hold when accounting for stock specific characteristics, various factors and market conditions.