Momentum or Contrarian Investment Strategies: Evidence from Dutch Institutional Investors

23 Pages Posted: 21 Oct 2011

See all articles by Leo de Haan

Leo de Haan

De Nederlandsche Bank

Jan Kakes

De Nederlandsche Bank - Monetary and Economic Policy Department

Date Written: January 1, 2010

Abstract

This paper analyses investment strategies of three types of institutional investors – pension funds, life insurers and non-life insurers – over the period 1999-2005. We use balance sheet and cash flow data, including purchases and sales of equity, fixed income and real estate. We trace asset reallocations back to both active trading and revaluations and link investment decisions to firm-specific characteristics and macroeconomic variables. Overall, our results indicate that all three investor types tend to be contrarian traders, i.e. they buy past losers and sell past winners. Especially pension funds showed this behaviour in the most turbulent part of the sample – the crash of 2002 and early 2003 – implying that these institutions have a stabilising impact on financial markets when this is needed most. Life insurers tend to be contrarian traders when they have a high proportion of unit-linked policies, while non-life insurers are contrarian when they have a more risky business model.

Keywords: Asset allocation, Investment strategy, Insurance companies, Pension funds

JEL Classification: G11, G12, G22

Suggested Citation

de Haan, Leo and Kakes, Jan, Momentum or Contrarian Investment Strategies: Evidence from Dutch Institutional Investors (January 1, 2010). De Nederlandsche Bank Working Paper No. 242. Available at SSRN: https://ssrn.com/abstract=1947269

Leo de Haan (Contact Author)

De Nederlandsche Bank ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands
+31 20 5243539 (Phone)
+31 20 5242514 (Fax)

Jan Kakes

De Nederlandsche Bank - Monetary and Economic Policy Department ( email )

Westeinde 1
1017 ZN Amsterdam
Netherlands

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