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

See all articles by Joshua Della Vedova

Joshua Della Vedova

The University of San Diego - Knauss School of Business

Andrew R. Grant

University of Sydney Business School - Discipline of Finance; Financial Research Network (FIRN)

P. Joakim Westerholm

University of Sydney Business School

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

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

Joshua Della Vedova (Contact Author)

The University of San Diego - Knauss School of Business ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States

Andrew R. Grant

University of Sydney Business School - Discipline of Finance ( email )

H69 Codrington Business School Building
Sydney, NSW 2006
Australia
61-2-9036-6238 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

P. Joakim Westerholm

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

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