Stock portfolio structure of individual investors infers future trading behavior

PLoS One. 2014 Jul 28;9(7):e103006. doi: 10.1371/journal.pone.0103006. eCollection 2014.

Abstract

Although the understanding of and motivation behind individual trading behavior is an important puzzle in finance, little is known about the connection between an investor's portfolio structure and her trading behavior in practice. In this paper, we investigate the relation between what stocks investors hold, and what stocks they buy, and show that investors with similar portfolio structures to a great extent trade in a similar way. With data from the central register of shareholdings in Sweden, we model the market in a similarity network, by considering investors as nodes, connected with links representing portfolio similarity. From the network, we find investor groups that not only identify different investment strategies, but also represent individual investors trading in a similar way. These findings suggest that the stock portfolios of investors hold meaningful information, which could be used to earn a better understanding of stock market dynamics.

Publication types

  • Research Support, Non-U.S. Gov't

MeSH terms

  • Investments*
  • Models, Theoretical*

Grant support

The work was supported by Swedish Research Council grant 2012-3729. The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.