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This study aims to find out why and how institutional investors in Hong Kong use momentum in the investment process.

This study is based on interviews with 25 institutional investors based in Hong Kong, all of whom had practical investment experience of at least three years and direct responsibility for making investment decisions.

Nearly all the managers interviewed use momentum strategies, and they gave three main reasons for this. First, they find momentum works in practice, particularly in the short term. Second, they believe recent changes in market conditions, such as higher volatility and widespread news coverage, have increased momentum effects. Third, they say institutional factors matter. Frequent monitoring of performance is now the norm, and this tends to focus on short-term results.

This study complements earlier quantitative research that shows momentum strategies is a method commonly used in investment decisions. It also adds to our knowledge of what institutional investors actually do in practice, and what factors influence their application of momentum strategies.

Momentum is an unresolved puzzle for the financial economists. The purpose of this paper is to dissect the sources of momentum profits and investigate the possible role played by the macro-economic variables in explaining them.

The data for 493 companies that form part of Bombay Stock Exchange 500 index in India is used for calculating 6-6 momentum profits. Profits from the strategy are regressed on Capital Asset Pricing Model (CAPM) and Fama-French (FF) model to see whether they can explain these profits. Guided by prior research, three methodologies are used to see the possible role played by macro-economic variables in explaining momentum payoffs.

The empirical results show that momentum profits are persistent in the intermediate horizon. CAPM and FF three-factor model fail to explain these returns. Price momentum seems to be explained in one of the model by lagged macro-economic variables which lend an economic foundation to the Carhart factor. The “Winner minus Loser” factor explains about 37 percent of abnormal returns on the winner portfolio that are missed by the FF model. The unexplained momentum profits seem to be an outcome of investors’ over-reaction to past information. Hence, the sources of price momentum profits seem to be partially behavioral and partially rational.

The failure of risk models in fully explaining the momentum profits may be good news for portfolio managers who are looking out for stock market arbitrage opportunities.

This paper fulfills an identified need to study the sources behind price momentum profits in Indian context.

The main aim of this paper is to empirically test at market level, the investors' differential reaction to information, contribution of their confidence level and adaptive behaviour to excessive market volatility in Indian stock market.

The Bivariate Vector Autoregression and Impulse Response Analysis are used to study whether investors over/under-react to private and public information. EGARCH models are used to study the contribution of investors' over/under-confidence and adaptive behaviour to excessive market volatility.

The investors over-react to private information and under-react to public information during pre-crash period, become overconfident and contribute to excessive volatility. They under-react to both private and public information during after-crash period, become under-confident and also conform to adaptive market hypothesis (AMH).

The empirical results of the study can help investors to minimize the negative impact of over/under-confidence on their expected utility.

The investors shall perform a post-analysis of investment, become aware of their past behavioural mistakes and start adapting to changing market conditions. This shall move the markets towards a new equilibrium in long run thus conforming AMH. However, the investors sometimes display an apparently irrational behaviour during this process.

To the best of the author's knowledge, this is the first study at market level data examining investors' over/under-reaction, over/under-confidence and adaptive behaviour in the context of stock market crash.

The purpose of this paper is to analyse the impact of industrial diversification on the profitability of contrarian and momentum strategies.

Using monthly returns, the weighted relative strength strategy (WRSS) is applied to 249 American listed stocks from January 1994 to April 2004. To study the impact of the 2000 crash on the results, the WRSS strategy during the 01/1994‐03/2000 and 04/2000‐04/2004 sub‐periods was implemented. Then, firms are classified, according to the intensity of their industrial diversification by Ward's method of hierarchical cluster analysis, into two sub‐samples: the diversified and non‐diversified samples. The WRSS strategy was re‐implemented on these sub‐samples. Finally, the Bootstrap without replacement is used to explore the risk‐based explanation of the trading strategies' profitability.

Results show that the momentum strategy seems to be no more profitable in the recent years. In fact, while momentum strategies earn large positive and significant returns before the 2000 crash, these returns are negative after the crash. Moreover, before the crash, the momentum effect was more pronounced for the non‐diversified sample. After the crash, a contrarian effect more important for this sample was identified. Finally, the Bootstrap without replacement results do not support the risk‐based explanation.

Future research may study the impact of diversification on investor psychology.

Diversified firms are efficiently valued. However, specialized firms are not correctly valued.

This is the first study that shows that contrarian or momentum portfolios formed by industrial diversification did not yield significant return.

The purpose of this paper is to investigate the changes in initial public offering (IPO) underpricing and short‐run performance following a regulatory reform (No. 54 [2002] China Securities Regulatory Commission (CSRC)) of the method of allocating IPO shares in China.

On 20 May 2002, the CSRC announced that IPO subscription and allotment would be based on the market value of investors' tradable shareholdings. Before the regulatory change, this was determined by the amount of funds used for subscription. The reform was intended to increase participation by both smaller and institutional investors. Based on a sample of 209 IPOs in the Shanghai A‐share market during the period 2001‐2003, the paper employs an event study methodology to examine the impact of this IPO regulatory reform.

The paper finds that the overall (pre‐ and post‐reform) average abnormal initial return of 116.94 per cent is lower than in earlier studies of Chinese IPOs but higher than in other markets. Post‐reform underpricing decreases by 42.27 per cent compared to pre‐reform levels. In the post‐listing aftermarket a pre‐reform upward trend of cumulative abnormal returns was reversed to become downward post‐reform. The results suggest that the regulatory change has encouraged well‐informed investors, consistent with Information Cascades and Bandwagon hypotheses. It also appears that the reform improved market efficiency and secondary market liquidity.

The findings shed light on the relationship between IPO costs, IPO pricing, market liquidity and market microstructure. They also have important implications for issuers, underwriters and in particular for policy markers.

Guided by several pioneered studies, the purpose of this paper is to comprehensively investigate the investment behaviours of Malaysian retail and institutional investors in an attempt to identify whether the influence of psychological biases is equally applicable to investor divides.

The researchers have adopted a quantitative research design by way of survey methodology to obtain data from institutional and retail investors in Malaysia. In addition, the authors have mainly employed second-order measurement invariance analysis to uncover the difference across investor divides.

The tests of measurement invariance at the model level indicate an insignificant difference between institutional investors and retail investors. The post hoc test (at the path level) reveals that institutional and retail investors are similar with respect to representative heuristic, overconfidence bias and anchoring bias; though the results also show that they are different with respect to religious bias and herding bias.

Based on the findings of this study, it is generally not logical to assume that institutional investors completely behave rational during investment decisions. Besides, future researchers are called upon to directly compare the investment decisions of institutional and retail investors with respect to whether the influence of psychological biases is equally applicable to them, particularly on the investigated psychological biases and other psychological biases that are not covered in this study.

This study has offered insight into whether the influence of psychological biases is equally applicable to institutional and retail investors in Malaysia using second-order measurement invariance analysis. This study is unique in context and the approach it has adopted.

The purpose of this paper is to identify whether heuristic and herding biases influence portfolio construction and performance in Greece. The current research determines the situation among investors in Greece, a country with several economic problems for the last decade.

A survey has been conducted covering a group of active private investors. The relationship between private investors' behavior and portfolio construction and performance was tested using a multiple regression.

The authors find that heuristic variable affects private investor's portfolio construction and performance satisfaction level positively. A robustness test on a second group, consisting of professional investors, reveals that heuristic and herding biases affect investment behavior when constructing a portfolio.

The authors recommend investors to select professional's investment portfolio tools in constructing investment portfolios and avoid excessive errors, which occur due to heuristic. The awareness and understanding of heuristic and herding could be helpful for professionals and decision-makers in financial institutions by improving their performance resulting in more efficient markets.

The main contribution of this paper lies in the fact that it is the first study on two major behavioral dimensions that affect the investor's portfolio construction and performance in Greece. The rationale of the current research is that the results are helpful for investors in order to take rational, reliable and profitable decisions.

We examine the stability of market prices for 35 technology and 35 industrial stocks for the period December 31, 1993 to October 31, 2002. A phase portrait plot of the detrended log prices and de‐meaned returns of the two sectors shows a chaotic pattern in the stock prices indicating the presence of nonlinearity. However, when we compute the Lyapunov exponents, negative values are obtained. This shows that the price fluctuations for the 70 stocks result primarily from diffusion processes rather than from nonlinear dynamics. We evaluate forecast errors from a naïve model, a neural network, and ARMA models and find that the forecast errors are correlated with average changes in closed‐end fund discounts and other sentiment indexes. These results support an investor sentiment explanation for the closed‐end fund puzzle and behavioral theories of investor overreaction.

The purpose of this paper is to review and discuss the literature focusing on defining and measuring sentiments so as to understand their role in stock market behavior.

Critical review of the literature by analyzing myriad scholarly articles. The study is based on an analysis of 81 scholarly articles to critically analyze the approach toward defining and measuring market sentiments. The articles have been examined to identify and critique different classification of sentiment measures. A discussion is built to scrutinize the sentiment measures under the purview of theoretical underpinnings of the investor sentiment theory as well.

With more than five decades of research, the sentiment construct in finance literature is still ill-defined. Myriad empirical proxies of sentiment measures have led to conflicting results. The sentiment construct defined in financial theories needs to be revisited from the lens of sentiments defined in psychology.

The study is limited to analyzing the role of individual and institutional sentiments in equity markets. There is a need to explore sentiments with respect to different investment styles and strategies along with the type of investors.

Developing a suitable sentiment proxy can result in devising profitable trading strategies for investors. Understanding factors driving investor sentiments will help regulators to become more proactive and frame better policies.

This paper has leveraged psychology literature to highlight the limitations in development of sentiment construct in finance literature. By identifying stylized facts from reviewing the empirical literature, it highlights areas for future research.

This study aims to investigate the asymmetric impact of daily announcements regarding COVID-19 on investor sentiment in the stock market.

This study uses a Non-Linear Autoregressive Distribution Lag (NARDL) model that relies on positive and negative partial sum decompositions of the Coronavirus indicators. Five investor sentiments had been used and the analysis is conducted on the full sample period from 24th February 2020 to 25th March 2021.

The results show that new cases have a greater impact on investor sentiment compared to daily announcements of new deaths related to COVID-19. In addition to revealing a significant impact of new COVID-19 new cases and new death announcements on a daily basis on investor sentiment over the short- and long-term, this paper also highlights the nonlinearity and asymmetry of this relationship in the short and long run. Investors' sentiments are more affected by negative news regarding Covid 19 than positive news.

Financial markets have been severely affected by COVID-19 pandemic. This study is the first to measure the extent of reaction of investors to positive and negative announcements of COVID-19. Interestingly, this study examines the asymmetric effect of daily announcements on new cases and new deaths by COVID-19 on investor sentiments and derive many implications for portfolio managers.