Retail investors and industry-based style investing : evidence from the Stock Exchange of Thailand

This study investigates if retail investors in the Stock Exchange of Thailand pursue industry-based style investing using transaction data during 2004-2013. It finds the coordination in retail investor demand at the industry-level. In contrast to the prediction of the style investing model, retail investor industry demand is negatively related to past industry returns. No relationship between retail investor industry demand and subsequent industry returns is found across all time horizons. In addition, there is evidence that after choosing to invest in an attractive industry, retail investors prefer to invest in small-cap stocks more than large-cap stocks. These findings suggest that retail investors' investment decisions are influenced by industry-wide categorization, and they make their buying decisions follow a two-step decision-making process.