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Trading behavior of stock investors: Black Monday revisited

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  • Jeong-Ryeol Kurz-Kim

    (Deutsche Bundesbank)

Abstract

Profitability of competing trading strategies on stock markets is one of the often discussed topics in the literature. In this regard, an empirical comparison of the two contradictory strategies, namely the momentum and the contrarian strategy, is of great interest. In this paper, we report a remarkable empirical finding taken from the US, Japanese and German stock markets, namely that the time series dynamics of the stock returns and, hence, the trading behavior of stock investors changed substantially around Black Monday in 1987. It turned out that before Black Monday investors behaved more in line with the momentum-like strategy, and after Black Monday more in line with the contrarian-like strategy.

Suggested Citation

  • Jeong-Ryeol Kurz-Kim, 2019. "Trading behavior of stock investors: Black Monday revisited," Journal of Asset Management, Palgrave Macmillan, vol. 20(4), pages 251-262, July.
    • Handle: RePEc:pal:assmgt:v:20:y:2019:i:4:d:10.1057_s41260-019-00120-w
    DOI: 10.1057/s41260-019-00120-w
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    References listed on IDEAS

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    1. Ding, Zhuanxin & Granger, Clive W. J. & Engle, Robert F., 1993. "A long memory property of stock market returns and a new model," Journal of Empirical Finance, Elsevier, vol. 1(1), pages 83-106, June.
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    3. Andreas Park & Hamid Sabourian, 2011. "Herding and Contrarian Behavior in Financial Markets," Econometrica, Econometric Society, vol. 79(4), pages 973-1026, July.
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    5. 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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    More about this item

    Keywords

    trading behavior; momentum strategy; contrarian strategy; profitability; Black Monday;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • G1 - Financial Economics - - General Financial Markets

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