Abstract
This paper examined the behavior of institutional and retail investors in Malaysia during the bulls and bears. The results revealed significant differences in behavioral patterns between these two groups of investors. For the institutional investors, obvious differences were found in the areas of overconfidence, liquidity preference, and price anchoring between these two distinct market trends. As for the retail investors, there were no obvious difference in investing behavior except in terms of liquidity preference and self-control. The overall results indicated that both investors exhibited overconfidence during both periods; nonetheless, they were somewhat rational by exercising self-control and being concerned with liquidity when making investment decisions. Both investors ranked dividend yield as the most important fundamental variable particularly during bearish market outlook. On the other hand, trend analysis was rated as the most important variable closely watched technical indicator during bullish market outlook. Consistent with the findings of both surveys, we provide evidence that dividend yield appeared to be significant risk factor as well.
ACKNOWLEDGMENTS
The authors are grateful for the financial support received from Permodalan Nasional Berhad. We thank Eric Seah, Wong Chia Hong, Lim Kai Zhian Lim Sook Yee, Choo Seng Hooi, Chong Chee Way, and Phan Pui San for their research assistance.