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Contrarians or momentum chasers? Individual investors’ behavior when trading exchange‐traded funds
Author(s) -
Da Dalt Carlo,
Feldman David,
Garvey Gerald,
Westerholm Peter Joakim
Publication year - 2019
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21979
Subject(s) - contrarian , momentum (technical analysis) , purchasing , trading strategy , business , financial economics , index (typography) , monetary economics , economics , marketing , world wide web , computer science
Conducting the first study of momentum impact on households’ exchange‐traded fund (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.