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Investment Patterns of Japanese Retail Investors in Foreign Exchange Margin Trading

Author

Listed:
  • Yui Mukoyama

    (Bank of Japan)

  • Naoya Kikuta

    (Bank of Japan)

  • Kazuaki Washimi

    (Bank of Japan)

Abstract

Japanese retail investors in foreign exchange margin trading have long been known to be contrarian and are expected to reduce price fluctuations to a certain degree. In contrast, a recent survey among these investors suggests that 70 percent of them adopt a trend-following strategy. Given that these trend followers are expected to both buy and sell in a very short time frame, this report examines the investment patterns of retail investors by investment time horizon using high-frequency transaction data. The result confirms a contrarian pattern for trading where positions are held overnight or longer. However, a trend-following pattern can be observed for trading within a day depending on the market situation (while a contrarian pattern is observed as a whole), which implies that trading within a day does not necessarily reduce intraday fluctuations.

Suggested Citation

  • Yui Mukoyama & Naoya Kikuta & Kazuaki Washimi, 2018. "Investment Patterns of Japanese Retail Investors in Foreign Exchange Margin Trading," Bank of Japan Review Series 18-E-3, Bank of Japan.
    • Handle: RePEc:boj:bojrev:rev18e03
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    File URL: http://www.boj.or.jp/en/research/wps_rev/rev_2018/data/rev18e03.pdf
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    Cited by:

    1. Alain Chaboud & Dagfinn Rime & Vladyslav Sushko, 2023. "The foreign exchange market," Chapters, in: Refet S. Gürkaynak & Jonathan H. Wright (ed.), Research Handbook of Financial Markets, chapter 12, pages 253-275, Edward Elgar Publishing.

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