Is individual trading priced in the preferred stock discount?

Cheol Park, Paul Moon Sub Choi, Joung Hwa Choi

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

Individuals have long been blamed for noise trader risk. Moreover, the literature suggests that the discount of preferred shares against comparable common equities is due to dual-class differences in dividend yield, voting rights, management control, and turnover. In this paper, we argue and present evidence that noise trader risk, as proxied by the individual trading weight, explains the preferred stock discount observed in the Korean stock market after controlling for the conventional determinants. This main result and additional considerations empirically support the presence of noise trader risk.

Original languageEnglish
Pages (from-to)326-346
Number of pages21
JournalEmerging Markets Review
Volume38
DOIs
StatePublished - Mar 2019

Keywords

  • Individual trading weight
  • Noise trader risk
  • Preferred stock discount

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