Contrarians or momentum chasers? Individual investors’ behavior when trading exchange-traded funds |
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| Authors: | Carlo Da Dalt David Feldman Gerald Garvey Peter Joakim Westerholm |
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| Institution: | 1. Investec Australia Limited, Financial Market, Sydney, NSW, Australia;2. School of Banking and Finance, UNSW Business School, UNSW Sydney, NSW 2052, Australia;3. BlackRock Inc., Systematic Active Equity;4. Discipline of Finance, University of Sydney Business School, Sydney, New South Wales, Australia |
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| Abstract: | 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. |
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| Keywords: | behavior contrarian ETF household momentum |
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