Trade-based analysis of momentum : evidence from Thailand

Abstract

This study uses the unique transaction data for Thailand SET50 stocks and other high turnover stocks in the period 1999 to 2008 to examine the behavior of each investor type based on Jegadeesh and Titman’s (1993) momentum strategy. There are three key findings: (1) each investor type trades differently, (2) the presence of foreign investors in the market affects how domestic investors trade, (3) the difference in trading behavior of each investor type cannot be explained by difference in trade size. Specifically, retail-trades exhibit a clear evidence of initial underreaction and delayed reaction to past return. For example, there is an initial retail buying pressure among losers which abruptly changes into selling pressure after the news arrives. Mutual fund and foreign-trades, however, show no evidence of underreaction. Though, mutual fund-trades demonstrate a little delayed reaction. In conclusion, the results further validate the points that different groups of investors behave dissimilarly and that retail investors are suffered from behavioral biases.