Who Drives Momentum Returns? The Impact of Investor Class Trading Deviations

This study examines how investor class net trading affects momentum returns. We find that when households and institutions deviate from typical behaviors—households buy winners and sell losers while institutions do the inverse—they amplify momentum by about

2% per year. These atypical trades cause an initial underreaction in the formation period, which is corrected by higher post-formation returns. Foreign investors, by contrast, exert no discernible impact. The findings reveal that shifts from expected trading patterns among

major investors generate variations in momentum returns. Overall, the results suggest that behavioral shifts can substantially strengthen momentum profitability

Keywords: Individual investors, Institutional investors, Momentum, 52 week high

JEL Classification: G11, G12, G40

Suggested Citation: Suggested Citation

Della Vedova, Joshua and Grant, Andrew R. and Westerholm, P. Joakim, Who Drives Momentum Returns? The Impact of Investor Class Trading Deviations (July 14, 2023). 29th Australasian Finance and Banking Conference 2016, Available at SSRN: https://ssrn.com/abstract=2826568 or http://dx.doi.org/10.2139/ssrn.2826568