US and Domestic Market Gains and Asian Investors’ Overconfident Trading Behavior


  • Wen-I Chuang,

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    • Wen-I Chuang is an Associate Professor of Finance in the College of Management at National Taiwan University, Taipei, Taiwan. Bong-Soo Lee is a Professor of Finance in the College of Business at Florida State University, Tallahassee, FL, USA. Kai-Li Wang is a Professor of Finance in the College of Management at Tunghai University, Taichung, Taiwan.

  • Bong-Soo Lee,

  • Kai-Li Wang

  • The authors would like to thank Marc Lipson (Editor), an anonymous referee, Yuanchen Chang, Robin K. Chou, Nicole Choi, and conference participants at 2011 FMA Asian Conference and 2012 Asian Finance Association (Asian FA) Annual Meeting for helpful comments. Wen-I Chuang and Kai-Li Wang gratefully acknowledge the financial support from the National Science Council of the Republic of China (NSC 92-2416-H-029-007-EF). All remaining errors are our own responsibility.


We find that subsequent to both US and domestic market gains, both Asian individual and institutional investors increase their trading and that this effect is more pronounced in bull markets, in periods of relatively favorable investor sentiment, in periods of extremely high market returns, and in markets with short-sale constraints. We also find that individual investors trade more in response to market gains than institutional investors. Moreover, we find that further integration of Asian stock markets with US stock markets after the Asian financial crisis in 1998 is an important reason for Asian investors’ response to US market gains.