Is Trading Behavior Stable Across Contexts? Evidence from Style and Multi-Style Investors

51 Pages Posted: 19 Sep 2012 Last revised: 23 Apr 2017

Douglas W. Blackburn

Fordham University

William N. Goetzmann

Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Andrey Ukhov

Cornell University

Date Written: April 23, 2012

Abstract

We investigate whether investors tend to form expectations about different categories of assets in a consistent, similar fashion, or whether an investor would apply different models for forming expectations depending on the classification or characteristics of the assets. We investigate the trading behavior of investors who specialize in value assets, investors who specialize in growth assets, and investors who trade both value and growth. We find important systematic differences in trading tendencies. Growth investors tend to follow a momentum buying and contrarian selling strategy and tend to rely on short term return signals while value investors follow a contrarian buying and momentum selling strategy and tend to rely on longer-term return signals. Surprisingly, multi-style investors, those who trade both value and growth, use different strategies depending on the style of asset being traded. When trading growth, the multi-style investor uses a momentum buy and contrarian sell strategy. However, when trading value, the multi-style investor uses a contrarian buy and momentum sell strategy. Hence, the multi-style investor trades like both the value and the growth style-investors. Investors adopt different trading strategies depending on the characteristics of asset being traded.

Keywords: Agent-specific vs Context-dependent risk taking, Individual Investor, Trading Behavior, Momentum, Contrarian

JEL Classification: D8, D9, E2, G2, D1

Suggested Citation

Blackburn, Douglas W. and Goetzmann, William N. and Ukhov, Andrey, Is Trading Behavior Stable Across Contexts? Evidence from Style and Multi-Style Investors (April 23, 2012). Quantitative Finance 14 (4) 2014; 29th International Conference of the French Finance Association (AFFI) 2012. Available at SSRN: https://ssrn.com/abstract=2079704 or http://dx.doi.org/10.2139/ssrn.2079704

Douglas W. Blackburn

Fordham University ( email )

45 Columbus Ave
New York City, NY 10023
United States

William N. Goetzmann

Yale School of Management - International Center for Finance ( email )

165 Whitney Ave.
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5950 (Phone)
203-436-9252 (Fax)

HOME PAGE: http://viking.som.yale.edu

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrey Ukhov (Contact Author)

Cornell University ( email )

Ithaca, NY 14853
United States

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