A Study on Investor Types, Firm Characteristics, and Asymmetric Volatility Effect

We examine in what way investor types affect asymmetric volatility of returns when we compare investor classes defined more strictly. It is documented that the coefficients of asymmetric volatility in higher shared portfolios are shown to be greater than that of lower shared portfolios in case of individual investors. In the case of foreign and institutional investor portfolios, the coefficients of asymmetric volatility in higher shared portfolio are smaller than that of lower shared portfolios. These results shed light on the idea that individual investors are relatively inferior in analyzing information, which is likely to lead to more sensitive reaction to external shocks compared to professional investors. It is also found that leverage, trade volume, and market capitalization affect the degree of asymmetric response of investors to external shocks. What is special with our research is that it combines financial time series data with investor and/or corporate types. By doing so we examine if difference of investor types or firm characteristics leads to difference of asymmetric volatility effect.