Keywords
Institutional Investors
Trading Style
Momentum-Contrarian
Buy Ratio
Logistic Regression
How to Cite
Abstract
Institutional investors, known for their professional expertise and high-volume trading, vary in their investment horizons and strategies, particularly in how they respond to macro-economic factors.This study investigates whether foreign institutional investors(FIIs) and domestic institutional investors (DIIs) in India adopt different trading styles in relation to macro-economic factors, with a particular focus on momentum and contrarian trading. The study uses the monthly aggregated investment flows of institutional investors in the equity market to measure the trading style from 1st April 2012 to 31st March 2024. The trading style of institutional investors is measured using the Buy Ratio. Further to determine which macro-economic factors increase the likelihood of institutional investors going momentum or contrarian is examined using the logistic regression model. The findings show institutional investors do not mimic each other trading style with respect to macro-economic announcements. The results reveal that there exist significant positive and negative relations between a few macro-economic factors and institutional investors. The study finds evidence that FIIs chase the market return and pursue a momentum trading style while DIIs adopt a contrarian trading style.
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