Momentum Strategies of German Mutual Funds

The final version of this paper has been published in Financial Markets and Portfolio Management, Vol. 27, Iss. 3 (2013), pp. 307-332

36 Pages Posted: 22 Feb 2013 Last revised: 2 Sep 2013

See all articles by Alexander Franck

Alexander Franck

University of Giessen - Department of Financial Services

Andreas Walter

University of Giessen - Department of Financial Services

Johannes Witt

Ernst & Young GmbH

Date Written: February 1, 2013

Abstract

The existence of the momentum effect in stock returns has been documented for the U.S. (e.g., Jegadeesh and Titman, 1993) and many other national equity markets worldwide (e.g., Griffin et al., 2003). However, little is known about the active employment of momentum strategies among institutional investors outside the U.S. In this respect, we provide first evidence of momentum behavior among German mutual funds.

We find the fund trades to follow stock returns on an aggregated institutional level. Moreover, we detect significant momentum behavior among funds with a European and global equity focus, and among funds predominantly investing in Asia. In contrast, German funds do not seem to employ momentum strategies when trading domestic stocks. While only half of the funds across the entire sample trade in accordance with past returns, 66% of the funds within the largest size quintile follow momentum strategies. Finally, we do not find momentum trading funds to outperform the other funds.

Keywords: Momentum investment strategies, behavioral finance, asset allocation, mutual funds

JEL Classification: D82, G11, G23

Suggested Citation

Franck, Alexander and Walter, Andreas and Witt, Johannes, Momentum Strategies of German Mutual Funds (February 1, 2013). The final version of this paper has been published in Financial Markets and Portfolio Management, Vol. 27, Iss. 3 (2013), pp. 307-332, Available at SSRN: https://ssrn.com/abstract=2220253 or http://dx.doi.org/10.2139/ssrn.2220253

Alexander Franck (Contact Author)

University of Giessen - Department of Financial Services ( email )

Licher Str, 74
Giessen, 35394
Germany

Andreas Walter

University of Giessen - Department of Financial Services ( email )

Betriebswirtschaftslehre V
Giessen, 35394
Germany

HOME PAGE: http://https://www.uni-giessen.de/fbz/fb02/fb/professuren/bwl/walter

Johannes Witt

Ernst & Young GmbH ( email )

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