Investment Patterns of Japanese Retail Investors in Foreign Exchange Margin Trading

Yui Mukoyama, Naoya Kikuta and Kazuaki Washimi
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Yui Mukoyama: Bank of Japan
Naoya Kikuta: Bank of Japan
Kazuaki Washimi: Bank of Japan

No 18-E-3, Bank of Japan Review Series from Bank of Japan

Abstract: Japanese retail investors in foreign exchange margin trading have long been known to be contrarian and are expected to reduce price fluctuations to a certain degree. In contrast, a recent survey among these investors suggests that 70 percent of them adopt a trend-following strategy. Given that these trend followers are expected to both buy and sell in a very short time frame, this report examines the investment patterns of retail investors by investment time horizon using high-frequency transaction data. The result confirms a contrarian pattern for trading where positions are held overnight or longer. However, a trend-following pattern can be observed for trading within a day depending on the market situation (while a contrarian pattern is observed as a whole), which implies that trading within a day does not necessarily reduce intraday fluctuations.

Date: 2018-11-20
New Economics Papers: this item is included in nep-mst
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