Investors’ Behavior in an Emerging, Tax Free Market

We provide the first empirical evidence, to the best of our knowledge, on the stock market participants' behavior in an emerging market, with a tax free environment. Our results show that UAE investors exhibit overconfidence and home bias, and tend to sell prior winners and buy prior losers. We find that investors mostly rely on familiarity and on their own information channels to make their decisions. The results also indicate that most investors are risk averse, especially after the Global Financial Crisis (GFC), which has had contagion effect on UAE markets as evidenced in our analysis. Investors attribute the contagion effect to the inability to manage systemic crisis and to problems of information asymmetry, insider trading, and lack of good governance in times of crisis. Our findings have important implications for the policy makers, and retail and institutional investors