Who Drives Momentum Returns? The Impact of Investor Class Trading Deviations
29th Australasian Finance and Banking Conference 2016
59 Pages Posted: 22 Aug 2016 Last revised: 3 Mar 2025
Date Written: July 14, 2023
Abstract
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
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