Do the Wealthiest Investors Cause the Most Significant Market Impact in the Long Run? The Reality in Open, Closed, Regulated, and Non-Regulated Stock Markets

Abstract

The wealthiest investors are not the ones that impact the stock market in the long run. This finding contradicts the basic claim in the Market Selection Hypothesis literatures and challenges the basic assumptions in the financial economic theories about the presence of representative agents that govern the relations of price. The result is robust, both for the regular market and the overall market, as well as in the open and closed market environments. Foreign investors as a group are the dominant long term players with regards to growth of wealth share in Indonesia’s stock market, not because of their superior investment strategies, but due to the fresh monies they heavily infuse in to the market.

Keywords: Market Selection Hypothesis, Evolutionary Finance, Long-term price impact, investor superiority, average growth of wealth share