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Crash-based quantitative trading strategies: Perspective of behavioral finance

Author

Listed:
  • Fang, Yan
  • Yuan, Jie
  • Yang, J. Jimmy
  • Ying, Shangjun

Abstract

Inspired by the studies on stock market crashes, we use documented indicators from behavioral finance to construct two quantitative trading strategies, i.e., Crash + Timing Strategy and Crash + Momentum-Reversal Strategy. Empirical analyses show that both strategies are effective and robust. Behavioral factors can be beneficial to investors when they are incorporated into their trading strategies.

Suggested Citation

  • Fang, Yan & Yuan, Jie & Yang, J. Jimmy & Ying, Shangjun, 2022. "Crash-based quantitative trading strategies: Perspective of behavioral finance," Finance Research Letters, Elsevier, vol. 45(C).
    • Handle: RePEc:eee:finlet:v:45:y:2022:i:c:s1544612321002579
    DOI: 10.1016/j.frl.2021.102185
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    References listed on IDEAS

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    More about this item

    Keywords

    Behavioral finance; Crash factor; Market timing; Momentum-reversal strategy;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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