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Black Monday, globalization and trading behavior of stock investors

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  • Kurz-Kim, Jeong-Ryeol

Abstract

Using a simple sign test, we report new empirical evidence, taken from both the US and the German stock markets, showing that trading behavior substantially changed around Black Monday in 1987. It turned out that before Black Monday investors behaved more as in the momentum strategy; and after Black Monday more as in the contrarian strategy. We argue that crashes, in general, themselves are merely a manifestation of uncertainty on stock markets and the high uncertainty due to globalization is mainly responsible for this change.

Suggested Citation

  • Kurz-Kim, Jeong-Ryeol, 2016. "Black Monday, globalization and trading behavior of stock investors," Discussion Papers 18/2016, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdps:182016
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    References listed on IDEAS

    as
    1. Kurz, Claudia & Kurz-Kim, Jeong-Ryeol, 2013. "What determines the dynamics of absolute excess returns on stock markets?," Economics Letters, Elsevier, vol. 118(2), pages 342-346.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Trading behavior; Momentum; Contrarian; Black Monday; Globalization; Uncertainty;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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