Who Trades on Momentum?

49 Pages Posted: 2 Nov 2014 Last revised: 30 Aug 2018

See all articles by Markus Baltzer

Markus Baltzer

Deutsche Bundesbank

Stephan Jank

Deutsche Bundesbank; University of Cologne - Centre for Financial Research (CFR)

Esad Smajlbegovic

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Multiple version iconThere are 2 versions of this paper

Date Written: August 28, 2018

Abstract

Using unique data with the complete ownership structure of the German stock market, we study the momentum and contrarian trading of different investor groups. Foreign investors and financial institutions, especially mutual funds, are momentum traders, whereas private investors are contrarians. The disposition effect only partly explains the aggregate contrarian trading of private investors. We document a substantial increase in sales of past loser stocks by momentum traders during the market decline associated with the recent financial crisis 2007-2009. Evidence indicates that these excessive sales pushed prices below their fundamental value and are predictive of the momentum crash in 2009.

Keywords: momentum anomaly, momentum crash, investor behavior, institutional investors, individual investors

JEL Classification: G10, G14, G23

Suggested Citation

Baltzer, Markus and Jank, Stephan and Smajlbegovic, Esad, Who Trades on Momentum? (August 28, 2018). Journal of Financial Markets, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2517462 or http://dx.doi.org/10.2139/ssrn.2517462

Markus Baltzer

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Stephan Jank

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

University of Cologne - Centre for Financial Research (CFR) ( email )

Albertus-Magnus Platz
Cologne, 50923
Germany

Esad Smajlbegovic (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

HOME PAGE: http://sites.google.com/site/esmajlbe/

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