The Overlooked Momentum Traders in 401(k) Plans

40 Pages Posted: 9 Jun 2015

See all articles by Ning Tang

Ning Tang

San Diego State University - Finance Department

Date Written: June 8, 2015

Abstract

Using a unique dataset on over one million 401(k) traders, we investigate momentum trading in 401(k) plans. We identify momentum traders in each quarter and evaluate how these traders perform. Results indicate the existence of momentum traders. However, there is no evidence that they successfully improve their portfolio performance. Instead, momentum sellers sell the outperformed funds. Overall, momentum traders could lose up to 2.14% per year. In seeking to explain such losses, we observe that 401(k) traders follow a naïve momentum strategy. They don’t have the ability to select funds with momentum investing styles but, instead, simply chase past returns.

Keywords: momentum; trading; portfolio performance; pension fund management; 401(k) plan

JEL Classification: G11, G12, G23

Suggested Citation

Tang, Ning, The Overlooked Momentum Traders in 401(k) Plans (June 8, 2015). Available at SSRN: https://ssrn.com/abstract=2616070 or http://dx.doi.org/10.2139/ssrn.2616070

Ning Tang (Contact Author)

San Diego State University - Finance Department ( email )

5500 Campanile Drive
San Diego, CA 92182-8236
United States

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