This study compares the differences in equity fund investment between retail and institutional investors by developing a new empirical feedback model. First, we find that retail investors engage in positive feedback trading for market timing and selectivity. Second, positive feedback trading for market timing of retail investors is due to sell-side trades. Positive feedback trading for selectivity is generated by a combined effect of both sell- and buy-side trades. Third, there is limited evidence of overconfidence in equity mutual funds. Fourth, we fail to find any indirect evidence of disposition effect from both investors. Finally, attribution bias affects positive feedback trading of retail investors, and they apply feedback trading for market timing and selectivity according to market conditions.
JEL classification: G02, G10, G11
Keywords: Feedback trading, Market timing, Selectivity, Retail investors, Institutional investors
