Momentum or Contrarian Investment Strategies:Evidence from Dutch institutional investors
AbstractThis 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 242.
Date of creation: Jan 2010
Date of revision:
Asset allocation; Investment strategy; Insurance companies; Pension funds;
Other versions of this item:
- de Haan, Leo & Kakes, Jan, 2011. "Momentum or contrarian investment strategies: Evidence from Dutch institutional investors," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2245-2251, September.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Terrance Odean, 1998. "Are Investors Reluctant to Realize Their Losses?," Journal of Finance, American Finance Association, vol. 53(5), pages 1775-1798, October.
- de Haan, Leo & Kakes, Jan, 2010.
"Are non-risk based capital requirements for insurance companies binding?,"
Journal of Banking & Finance,
Elsevier, vol. 34(7), pages 1618-1627, July.
- Leo de Haan & Jan Kakes, 2007. "Are non-risk based capital requirements for insurance companies binding?," DNB Working Papers 145, Netherlands Central Bank, Research Department.
- Lo, Andrew W. (Andrew Wen-Chuan) & MacKinlay, Archie Craig, 1955-., 1989.
"When are contrarian profits due to stock market overreaction?,"
3008-89., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Lo, Andrew W & MacKinlay, A Craig, 1990. "When Are Contrarian Profits Due to Stock Market Overreaction?," Review of Financial Studies, Society for Financial Studies, vol. 3(2), pages 175-205.
- Andrew W. Lo & A. Craig MacKinlay, 1989. "When are Contrarian Profits Due to Stock Market Overreaction?," NBER Working Papers 2977, National Bureau of Economic Research, Inc.
- Mark Grinblatt, 2001.
"What Makes Investors Trade?,"
Journal of Finance,
American Finance Association, vol. 56(2), pages 589-616, 04.
- Grinblatt, Mark & Titman, Sheridan & Wermers, Russ, 1995. "Momentum Investment Strategies, Portfolio Performance, and Herding: A Study of Mutual Fund Behavior," American Economic Review, American Economic Association, vol. 85(5), pages 1088-1105, December.
- S.G. Badrinath & Sunil Wahal, 2002. "Momentum Trading by Institutions," Journal of Finance, American Finance Association, vol. 57(6), pages 2449-2478, December.
- Asem, Ebenezer, 2009. "Dividends and price momentum," Journal of Banking & Finance, Elsevier, vol. 33(3), pages 486-494, March.
- Chiang, Thomas C. & Zheng, Dazhi, 2010. "An empirical analysis of herd behavior in global stock markets," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1911-1921, August.
- Ferstl, Robert & Weissensteiner, Alex, 2009.
"Asset-Liability Management under time-varying Investment Opportunities,"
15068, University Library of Munich, Germany.
- Ferstl, Robert & Weissensteiner, Alex, 2011. "Asset-liability management under time-varying investment opportunities," Journal of Banking & Finance, Elsevier, vol. 35(1), pages 182-192, January.
- Dirk Broeders & Paul Hilbers & David Rijsbergen & Ningli Shen, 2014. "What Drives Pension Indexation in Turbulent Times? An Empirical Examination of Dutch Pension Funds," De Economist, Springer, vol. 162(1), pages 41-70, March.
- Aglietta, Michel & Brière, Marie & Rigot, Sandra & Signori, Ombretta, 2012. "Rehabilitating the role of active management for pension funds," Journal of Banking & Finance, Elsevier, vol. 36(9), pages 2565-2574.
- Alexander Franck & Andreas Walter & Johannes Witt, 2013. "Momentum strategies of German mutual funds," Financial Markets and Portfolio Management, Springer, vol. 27(3), pages 307-332, September.
- Juan Carlos Matallín-Sáez & Amparo Soler-Domínguez & Emili Tortosa-Ausina, 2014. "On the robustness of persistence in mutual fund performance," Working Papers 2014/01, Economics Department, Universitat Jaume I, Castellón (Spain).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rob Vet).
If references are entirely missing, you can add them using this form.