Individuals’ Return Predictability in Market and Limit Trades


  • Hyo-Jeong Lee,

    Corresponding author
    1. Division of Business Administration, Kwangwoon University
    • Corresponding author: Hyo-Jeong Lee, Division of Business Administration, Kwangwoon University, 20 kwangwoonro, Nowon-Gu, Seoul 139-701, Korea. Tel: +82-2-940-8262, Fax: +82-2-940-8181, email:

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  • Hyuk Choe

    1. College of Business Administration, Seoul National University
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  • Acknowledgments: We are grateful for comments from Hee-Joon Ahn, Bong-Chan Kho, Kuan-Hui Lee, and Woojin Kim. The present research has been funded by the Research Grant of Kwangwoon University in 2013. Choe is grateful to the Institute of Management Research at Seoul National University Business School for financial support. Finally, we thank the editor and the anonymous referee for extremely helpful comments and suggestions


This paper studies individuals’ return predictability and its economic sources for each trade type using a long-period database containing detailed information of every transaction on the Korea Stock Exchange. Both market and limit trades of individual investors have short-horizon return predictability. Return predictability in limit trades is related to compensation for liquidity provision, but that in market trades seems to be given for private information and be amplified by the serially correlated trading of individual investor groups. The return predictability of individuals’ total trades is economically insignificant, implying that individuals’ return predictability is not a special anomaly refuting market efficiency.