DocumentCode :
2345578
Title :
Performance of Biased Trend-Following Stock Investor in Mainland China and Hong Kong
Author :
Cheung, Haywood ; Lai, Kin Keung ; Liu, Ke
Author_Institution :
Simsen Int. Corp. Ltd., Hong Kong, China
fYear :
2011
fDate :
15-19 April 2011
Firstpage :
548
Lastpage :
552
Abstract :
As extensively documented in literature, stock investors are not fully rational in their trading decisions as many behavioral biases affect their actions. However, most of the behavioral finance literature has explained only empirical phenomena observed in financial markets, little attention has been paid to how technical investors´ trading performance is affected by their behavioral biases. Incorporating conservatism bias and disposition effect, we construct a model of moving average strategies to mimic technical trend followers. A comparative study is conducted by applying the model to historical data of SSE Index and HSI for the period from 12 Jul. 1994 to 15 Oct. 2010; findings with respect to different terms (time steps) of trend following and impact of the biases are drawn. It´s found that trend-following strategies can remarkably beat both the markets, and trends exist in a shorter term for China stock market than for Hong Kong market. In contrast, downward trend following cannot produce consistent gains in either market. Further, behavioral biases exert detrimental effects on traders chasing trends over shorter terms.
Keywords :
behavioural sciences; investment; stock markets; China; China stock market; HSI; Hong Kong; SSE Index; behavioral biases; behavioral finance; biased trend-following stock investor; conservatism bias; disposition effect; moving average strategy; technical investor trading performance; trend-following strategy; Benchmark testing; Data models; Finance; Indexes; Psychology; Reactive power; Stock markets; Behavioral Bias; Behavioral Finance; Conservatism; Disposition Effect; Trend-following Investor;
fLanguage :
English
Publisher :
ieee
Conference_Titel :
Computational Sciences and Optimization (CSO), 2011 Fourth International Joint Conference on
Conference_Location :
Yunnan
Print_ISBN :
978-1-4244-9712-6
Electronic_ISBN :
978-0-7695-4335-2
Type :
conf
DOI :
10.1109/CSO.2011.202
Filename :
5957722
Link To Document :
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