To sell or not to sell? Behavior of shareholders during price collapses

It is a common belief that the behavior oil shareholders depends upon the d irection of price fluctuations: if prices increase they buy, if prices decr ease they sell. That belief, however, is more based on "common sense" than on facts. In this paper, we present evidence for a specific class of shareh olders which shows that the actual behavior of shareholders can be markedly different. Far instance, they may continue to buy despite a prolonged fall in prices or they may sell even though prices climb. A closer analysis sho ws that a substantial proportion of investors are more influenced by the "g eneral social climate" than by actual price changes. The percentage of spec ulative investors who optimize their portfolio on a monthly basis can be es timated and turns out to be about 5 to 10%. The results presented in this p aper can be of usefulness in order to test the assumptions or the results o f market simulations and models.