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Momentum trading behavior in the FX market: Evidence from Japanese retail investors

Author

Listed:
  • Maiko Koga

    (Bank of Japan)

Abstract

This article explores behaviors of emerging players in the foreign exchange markets, retail investors in Japan. We find that they are momentum traders, implying that their actions could have a destabilizing effect in the markets. We also present the fact that the portfolio formation is mainly driven by past returns from spot rate changes, not interest rate differentials. Examining asymmetries in their behaviors shows that momentum tradings are relatively stronger particularly for sells after the global financial crisis occurred.

Suggested Citation

  • Maiko Koga, 2016. "Momentum trading behavior in the FX market: Evidence from Japanese retail investors," Economics Bulletin, AccessEcon, vol. 36(1), pages 92-96.
    • Handle: RePEc:ebl:ecbull:eb-15-00435
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    References listed on IDEAS

    as
    1. Stephanie E. Curcuru & Charles P. Thomas & Francis E. Warnock & Jon Wongswan, 2011. "US International Equity Investment and Past and Prospective Returns," American Economic Review, American Economic Association, vol. 101(7), pages 3440-3455, December.
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    6. Okunev, John & White, Derek, 2003. "Do Momentum-Based Strategies Still Work in Foreign Currency Markets?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(2), pages 425-447, June.
    7. Dagfinn Rime & Andreas Schrimpf, 2013. "The anatomy of the global FX market through the lens of the 2013 Triennial Survey," BIS Quarterly Review, Bank for International Settlements, December.
    8. Grinblatt, Mark & Titman, Sheridan & Wermers, Russ, 1995. "Momentum Investment Strategies, Portfolio Performance, and Herding: A Study of Mutual Fund Behavior," American Economic Review, American Economic Association, vol. 85(5), pages 1088-1105, December.
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    Cited by:

    1. Vojtech Kotrba, 2023. "Testing “hot hand” hypothesis at the individual athletes' level in soccer," Economics Bulletin, AccessEcon, vol. 43(3), pages 1356-1365.

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    More about this item

    Keywords

    Foreign exchange markets; Momentum strategy; Portfolio; Retail investors;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G1 - Financial Economics - - General Financial Markets

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