Tournament-type utility, absolute cumulative intra-quarter return, institutional feedback trading and return autocorrelation
Date
2025
Authors
Ulku, N.
Dul, J.
Editors
Advisors
Journal Title
Journal ISSN
Volume Title
Type:
Journal article
Citation
Journal of Behavioral and Experimental Finance, 2025; 45(101010):1-16
Statement of Responsibility
Conference Name
Abstract
We examine the behavioral basis of Johnson's (2016) model of competition among asset managers with tournament type utility, offered to explain short-horizon reversals in stock market returns. First, we report that the intriguing pattern -the absolute cumulative intra-quarter return rtQ drives negative autocorrelation in S&P500 returns-, by which Johnson (2016) supports the disagreement-about-persistence (DAP) mechanism in his model, pervasively holds in international stock markets. In contrast, we find limited evidence of institutional trading behavior consistent with the DAP mechanism, using data with institutional trader identities from Finland and S&P500 futures position data. The pattern's association with the DAP mechanism is doubtful. We document a new empirical fact, which provides a more robust alternative explanation compatible with the pervasiveness of this pattern: rtQ drives the intensity of aggregate institutional positive feedback trading, which in turn drives time-variation in return autocorrelation.
School/Discipline
Dissertation Note
Provenance
Description
Data source: supplementary material, https://doi.org/10.1016/j.jbef.2024.101010
Access Status
Rights
Copyright 2024 Elsevier