Extreme risk and small investor behavior in developed markets

Lorne N. Switzer; Jun Wang; Seungho Lee

doi:10.1057/s41260-017-0047-6

Extreme risk and small investor behavior in developed markets

Lorne N. Switzer^*, Jun Wang, Seungho Lee

^*Corresponding author for this work

Accountancy & Finance, Finance

Research output: Contribution to journal › Article › peer-review

3 Citations (Scopus)

Abstract

This paper examines the responses of small investors of ten developed markets as they are exposed to extreme risk. We focus on mutual fund flows that are induced by extreme market episodes (measured daily, weekly, and monthly) versus volatile periods captured by the traditional standard deviation metric. The extreme-day measure captures the behavior of small retail investors in the US and Canada better than the traditional standard deviation measure, based on funds flows to equity mutual funds. The evidence for the other countries of the study is mixed. Small investors in countries in the G-7 with more collective (as opposed to individualistic) cultures show less responses to changes in risk.

Original language	English
Pages (from-to)	457–475
Number of pages	19
Journal	Journal of Asset Management
Volume	18
Issue number	6
Early online date	30 Mar 2017
DOIs	https://doi.org/10.1057/s41260-017-0047-6
Publication status	Published - 31 Oct 2017

Bibliographical note

Financial support from SSHRC to Switzer is gratefully acknowledged. We would like to thank the Editor, Steven Satchell, the anonymous referee, Frank Fabozzi, and seminar participants at the EFMA and the ESSEC Conference on Extreme Events in Finance for their valuable comments.

Keywords

volatility
extreme risk
small investor behavior

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Seungho Lee
- Business School, Accountancy & Finance, Finance - Lecturer
Person: Academic

Cite this

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title = "Extreme risk and small investor behavior in developed markets",

abstract = "This paper examines the responses of small investors of ten developed markets as they are exposed to extreme risk. We focus on mutual fund flows that are induced by extreme market episodes (measured daily, weekly, and monthly) versus volatile periods captured by the traditional standard deviation metric. The extreme-day measure captures the behavior of small retail investors in the US and Canada better than the traditional standard deviation measure, based on funds flows to equity mutual funds. The evidence for the other countries of the study is mixed. Small investors in countries in the G-7 with more collective (as opposed to individualistic) cultures show less responses to changes in risk.",

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AU - Switzer, Lorne N.

AU - Wang, Jun

AU - Lee, Seungho

N1 - Financial support from SSHRC to Switzer is gratefully acknowledged. We would like to thank the Editor, Steven Satchell, the anonymous referee, Frank Fabozzi, and seminar participants at the EFMA and the ESSEC Conference on Extreme Events in Finance for their valuable comments.

PY - 2017/10/31

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N2 - This paper examines the responses of small investors of ten developed markets as they are exposed to extreme risk. We focus on mutual fund flows that are induced by extreme market episodes (measured daily, weekly, and monthly) versus volatile periods captured by the traditional standard deviation metric. The extreme-day measure captures the behavior of small retail investors in the US and Canada better than the traditional standard deviation measure, based on funds flows to equity mutual funds. The evidence for the other countries of the study is mixed. Small investors in countries in the G-7 with more collective (as opposed to individualistic) cultures show less responses to changes in risk.

AB - This paper examines the responses of small investors of ten developed markets as they are exposed to extreme risk. We focus on mutual fund flows that are induced by extreme market episodes (measured daily, weekly, and monthly) versus volatile periods captured by the traditional standard deviation metric. The extreme-day measure captures the behavior of small retail investors in the US and Canada better than the traditional standard deviation measure, based on funds flows to equity mutual funds. The evidence for the other countries of the study is mixed. Small investors in countries in the G-7 with more collective (as opposed to individualistic) cultures show less responses to changes in risk.

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KW - small investor behavior

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JO - Journal of Asset Management

JF - Journal of Asset Management

IS - 6

ER -

Extreme risk and small investor behavior in developed markets

Abstract

Bibliographical note

Keywords

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Seungho Lee

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