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The Use of Trading Strategies by Fund Managers: Some First Survey Evidence

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  • Menkhoff, Lukas
  • Schmidt, Ulrich

Abstract

Our questionnaire survey finds that most fund managers rely on the strategies of buy-and-hold, momentum and contrarian trading. These strategies are typically applied mutually. Their use is rooted in the attributes and beliefs of the respective fund managers: buy-and-hold traders behave fundamentally oriented, risk averse and less (over)confident than others. Momentum traders appear as the least risk averse professionals going aggressively with the trend. Contrarian traders, however, show signs of overconfidence and peculiar risk aversion, both indicating difficulties in successful strategy implementation. The revealed behavioural patterns are not easily reconciled with efficient markets.

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Bibliographic Info

Paper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-314.

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Length: 25 pages
Date of creation: Apr 2005
Date of revision:
Handle: RePEc:han:dpaper:dp-314

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Keywords: market efficiency; buy-and-hold strategy; momentum trading; contrarian strategy; behavioural finance;

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Citations

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Cited by:
  1. Beckmann, Daniela & Menkhoff, Lukas & Suto, Megumi, 2007. "Does Culture Influence Asset Managers? Views and Behavior?," Hannover Economic Papers (HEP), Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät dp-367, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  2. Markus Demary, 2011. "Transaction taxes, greed and risk aversion in an agent-based financial market model," Journal of Economic Interaction and Coordination, Springer, vol. 6(1), pages 1-28, May.
  3. Menkhoff, Lukas & Rebitzky, Rafael & Schröder, Michael, 2005. "Do Dollar Forecasters Believe too Much in PPP?," Hannover Economic Papers (HEP), Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät dp-321, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  4. Bruce Mizrach & Susan Weerts, 2006. "Highs and Lows: A Behavioral and Technical Analysis," Departmental Working Papers, Rutgers University, Department of Economics 200610, Rutgers University, Department of Economics.
  5. Marina Nikiforow, 2010. "Does training on behavioural finance influence fund managers' perception and behaviour?," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 20(7), pages 515-528.
  6. Manjrekar, Rajesh & Sinha, Pankaj, 2010. "Myopic investment view of the Indian mutual fund industry," MPRA Paper 22458, University Library of Munich, Germany.
  7. Alexander Franck & Andreas Walter & Johannes Witt, 2013. "Momentum strategies of German mutual funds," Financial Markets and Portfolio Management, Springer, Springer, vol. 27(3), pages 307-332, September.
  8. Christopher J. Neely & Paul A. Weller, 2011. "Technical analysis in the foreign exchange market," Working Papers, Federal Reserve Bank of St. Louis 2011-001, Federal Reserve Bank of St. Louis.
  9. Białkowski, Jędrzej & Bohl, Martin T. & Kaufmann, Philipp & Wisniewski, Tomasz P., 2013. "Do mutual fund managers exploit the Ramadan anomaly? Evidence from Turkey," Emerging Markets Review, Elsevier, Elsevier, vol. 15(C), pages 211-232.
  10. Jo-Hui Chen, 2010. "Gender difference and job replacement for mutual fund," Quality & Quantity: International Journal of Methodology, Springer, Springer, vol. 44(4), pages 661-671, June.
  11. Lang, Gunnar & Schäfer, Henry, 2013. "What is the wind behind the sails to go abroad? Empirical evidence from the mutual fund industry," ZEW Discussion Papers 13-022, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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