Individual investor behaviours – time zone effect and crisis impact

<p dir="ltr">This research provides an in-depth exploration of three distinct studies, each shedding light on different aspects of individual investor behaviour. The first study examines the influence of time zone differences on trading strategies employed by retail investors in the Australian Securities Exchange (ASX). The second study investigates the quality of price discovery at the time of earnings announcements. It specifically focuses on stocks with a substantial investor base in a time zone different from the securities exchange where the stocks are traded. Lastly, the third study examines individual investors' environmental, social and governance (ESG) preferences during periods of market stress, specifically during the COVID-19 pandemic. These studies offer a comprehensive understanding of individual investor behaviour under varying circumstances.</p><p dir="ltr">In the first study, a comparative analysis is conducted to examine the order aggressiveness of investors from two distinct time zones within Australia –Australian Eastern Standard Time (AEST) and the Australian Western Standard Time (AWST). It uses a dataset of retail orders obtained from a brokerage firm in Sydney, New South Wales (NSW). The study finds that investors in the zone generally exhibit less aggressive trading behaviours than their AEST zone counterparts, especially during early market sessions. Additionally, it notes that aggressive trading hurts investment performance. It further explores potential reasons for these differences in aggressiveness, investigating if these disparities are linked to time zones' impact on investors' cognitive abilities, mood, and risk preferences. It utilizes a PROBIT regression model as its principal empirical method to investigate the research questions and examines the aggressiveness of orders placed before and after the implementation of daylight saving time. It augments the current literature on order aggressiveness by highlighting the effect of time zone differences on the order submission strategies. It also has practical implications for investors, regulators, and market operators.</p><p dir="ltr">The second study investigates the influence of timing and location of earnings announcements on the informational efficiency of price and the information content of trades. It employs Vector Moving Averages (VMA) to estimate pricing errors and utilizes multiple regression with fixed effects to analyse changes in information content surrounding earnings announcements. The findings suggest that stocks with a significant investor base in Western Australia (WA) demonstrate a lower quality of price discovery following earnings announcements. Furthermore, the stock prices of these companies do not fully incorporate the earnings news until later in the day, when a greater number of WA investors participate in the market. This study enhances the existing literature on accounting, behavioural finance, and market microstructure by highlighting potential issues of informational efficiency in stocks with a substantial investor base in a different time zone than the stock exchange where they are listed.</p><p dir="ltr">The final study investigates the ESG preferences of retail investors amidst the COVID-19 pandemic. It utilises data from Robinhood, a popular trading platform, from 4 January 2020–13 August 2020, and ESG scores from ASSET4 (Thomson Reuters), Sustain Analytics, and Yahoo Finance. It finds a noticeable decline in retail investors holding securities with inferior environmental[E] scores. Additionally, it demonstrates that the aggregate measure of ESG does not reliably reflect the information content in subcategory scores. This study applies multiple regression with fixed effects, and propensity based score matching mechanism to control for xvi unobserved heterogeneity and to ensure that the estimates are not biased due to omitted variable bias. This study contributes to the literature on ESG investing and behavioural finance by demonstrating retail investors' perspectives on ESG subcategories, particularly in response to the disruption caused by a global pandemic.</p>