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Black Monday, globalization and trading behavior of stock investors

Jeong-Ryeol Kurz-Kim

No 18/2016, Discussion Papers from Deutsche Bundesbank

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.

Keywords: Trading behavior; Momentum; Contrarian; Black Monday; Globalization; Uncertainty (search for similar items in EconPapers)
JEL-codes: C12 G02 G11 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-fmk, nep-mst and nep-net
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