Contrarians or Momentum Chasers? Individual Investors’ Behavior When Trading ETFs

Forthcoming, The Journal of Futures Markets

38 Pages Posted: 23 Oct 2018 Last revised: 26 Oct 2018

See all articles by Carlo Da Dalt

Carlo Da Dalt

Investec

David Feldman

Banking and Finance, UNSW Business School, UNSW Sydney; Financial Research Network (FIRN)

Gerald T. Garvey

Blackrock

P. Joakim Westerholm

University of Sydney Business School

Date Written: October 4, 2018

Abstract

Conducting the first study of momentum impact on households’ ETF trading behavior, we find that Finnish households are less contrarian when trading benchmark index ETFs than when trading common stocks. Also, their propensity to chase recent positive momentum is higher when purchasing ETFs than when purchasing stocks. As expected, results are stronger for ETF purchases than sales. Our findings are consistent with hypotheses that households are less overconfident trading index ETFs than common stocks, that contrarian behavior is more often rational when trading stocks than when trading ETFs, and that households trade ETFs for the long run.

Keywords: ETF, Momentum, Contrarian, Household, Behavior

JEL Classification: G11, G40

Suggested Citation

Da Dalt, Carlo and Feldman, David and Garvey, Gerald T. and Westerholm, P. Joakim, Contrarians or Momentum Chasers? Individual Investors’ Behavior When Trading ETFs (October 4, 2018). Forthcoming, The Journal of Futures Markets , Available at SSRN: https://ssrn.com/abstract=3261908

Carlo Da Dalt

Investec ( email )

Level 31, Riparian Plaza
71 Eagle Street
Brisbane, Queensland 4000
Australia

David Feldman (Contact Author)

Banking and Finance, UNSW Business School, UNSW Sydney ( email )

UNSW Sydney, NSW 2052
Australia
+61 2 9385 5748 (Phone)
+61 2 9385 6347 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Gerald T. Garvey

Blackrock ( email )

Level 37, Chifley Tower
2 Chfiley Square
Sydney, NSW 2000
Australia
+61 2 9272 2388 (Phone)

P. Joakim Westerholm

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

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