TY  - JOUR
AU  - Goetzmann,William N.
AU  - Massa,Massimo
TI  - Daily Momentum and Contrarian Behavior of Index Fund Investors
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7567
PY  - 2000
Y2  - February 2000
UR  - http://www.nber.org/papers/w7567
L1  - http://www.nber.org/papers/w7567.pdf
N1  - Author contact info:
William N. Goetzmann
School of Management
Yale University
Box 208200
New Haven, CT 06520-8200
Tel: 203/432-5950
Fax: 203/432-3003
E-Mail: william.goetzmann@yale.edu

Massimo Massa
INSEAD
Department of Finance
Blve de Constance
77305 Fontainebleau  FRANCE
E-Mail: massimo.massa@insead.edu
AB  - We use a two-year panel of individual accounts in an S&P 500 index mutual fund to examine the trading and investment behavior of more than 91 thousand investors who have chosen a low-cost, passively managed vehicle for savings. This allows us to characterize investors' heterogeneity in terms of their investment patterns. In particular, we identify positive feedback traders as well as contrarians whose activities are conditional upon preceding day stock market moves. We test the consistency and profitability of these conditional strategies over time. We find that more frequent traders are typically contrarians, while infrequent traders are more typically momentum investors.  The dynamics of these investor classes help us to partially examine the question of the marginal investor over the period of our study. We find that the behavior of momentum investors is typically more correlated to changes in the S&P 500 and we trace its dynamics over time. We build up  behavioral factors' based on contrarian and momentum flows and show that they perform well against a benchmark of loadings on latent factors extracted from returns. We also use the behavior of momentum and contrarian investors to build a measure of  market polarization.' This captures the dispersion of beliefs among the investors and helps to account for asset pricing better than standard measures of dispersion of beliefs.
ER  -