A number of recent studies examine investor trading decisions. Odean (1998a) finds that, as predicted by Shefrin and Statman (1985), individual investors exhibit a disposition effect—investors tend to sell their winning stocks and hold on to their losers. Both individual and professional investors have been found to behave similarly with several types of assets including real estate (Genesove and Mayer, 2001), company stock options (Heath, Huddart, and Lang, 1999), and futures (Heisler, 1994; Locke and Mann, 2000; also see Shapira and Venezia, 2001).

It is well documented that volume increases on days with information releases or large price moves (Bamber, Barron, and Stober, 1997; Karpoff, 1987). For example, when Maria Bartiromo mentions a stock during the Midday Call on CNBC, volume in the stock increases nearly fivefold (on average) in the minutes following the mention (Busse and Green, 2002). Yet, for every buyer, there is a seller. In general, these studies do not investigate who is buying and who is selling, which is the focus of our analysis. One exception is Lee (1992). He examines trading activity around earnings announcements for 230 stocks over a 1-year period. He finds that small traders—those who place market orders of less than $10,000—are net buyers subsequent to both positive and negative earnings surprises. Hirshleifer et al. (2003) document that individual investors are net buyers following both positive and negative earnings surprises. Lee ...

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