Individual Investors’ Attention to Left Tail Risk

Left tail risk shows the probability of the occurrence of undesirable events. Investors who undergo the left tail risk are likely to experience considerable negative returns since the left tail risk oftentimes continues to the next period. Thus, if individual investors show scant attention to the left tail risk, holding the risky stocks, high levels of negative return are almost inevitable. The purpose of this study is to investigate whether or not the attention of individual investors to the risk is limited.
Data fromone hundred and twenty (120) companies listed in Tehran Stock Exchange during the period from 2010 to 2018 was analysed using Fama regression and Macbeth.
The results of the present research suggest that individual investors, due to their little capacity and confidence in accepting risks, pursue a conservative investment program and their selling of their stocks depends on the probability of the left tail risk persistence in the next period.