Investing in Stock & Futures:ingle or Multiple Mental Accounts
Date Issued
2009
Date
2009
Author(s)
Wu, Ai-Wei
Abstract
The thesis mainly focuses on investors who invest in stock and futures markets simultaneously. The target investors within dual markets we adopted represent 1.16% of total samples that investors focus on stock market or futures market; the male investors overpass females by 18% while the age between 20 and 50 is the dominant group. Then, within further differentiating the trading motivations between hedging and speculating, we found out that the latter obviously dominate the other, which illustrates investing in futures market as for speculation is the main purpose to investors, while the ratio of hedging to speculating is 1:6 in stock and 1:2 in futures markets respectively. By utilizing the investors’ trading behavior within stock and futures markets, we had further research on the mental accounts. The investors trading for hedging treat these two markets as a single mental account due to the high correlation of the number of transactions between two markets and to the low portfolio risk comparing with investing in single stock market only. On the other side, speculating investors which manifests these investors treat the trading separately as for different mental accounts. Our research also finds out that investors are inclined to invest in stocks only when market goes up for a while; however, they will shift to futures when 1) market drops over a short span, and 2) market is volatile.
Subjects
stock market
futures market
behavioral finance
mental account
hedge
Type
thesis
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