Momentum trading: How it differs among investor segments

This study explores the momentum trading behaviours across different investor segments in the Turkish stock market. The empirical analysis confirms the positive return of the momentum strategy both in absolute terms and relative to the market benchmark, and the results support distinctive trading patterns among different investor segments. Specifically, foreign investors follow momentum trading, while domestic individuals lean towards contrarian trading. Further analysis shows that domestic individual investors exhibit a propensity to sell stocks with unrealised capital gains and to increase holdings of stocks with unrealised capital loss consistent with the disposition effect. Nevertheless, the trading behaviour of domestic individual investors could not be explained solely by the disposition effect. In contrast, foreign investors increase ownership share in stocks with unrealised capital gains but their momentum trading behaviour is confirmed even after controlling for disposition effect. These findings contribute to the broader understanding of investor trading behaviour within an emerging market context and provide valuable insights into the applicability of results from developed markets.