Style and Skill: Hedge Funds, Mutual Funds, and Momentum
Management Science, Forthcoming
Posted: 29 Jan 2020
Date Written: January 10, 2016
Classifying mandatory 13F stock-holding filings by manager type reveals that hedge fund strategies are mostly contrarian, while mutual fund strategies are largely trend following. The only institutional performers — the 2/3 of hedge fund managers that are contrarian — earn alpha of 2.4% per year. Contrarian hedge fund managers tend to trade profitably with all other manager types, especially when purchasing stocks from momentum-oriented hedge and mutual fund managers. Superior contrarian hedge fund performance exhibits persistence and stems from stock-picking ability rather than liquidity provision. Aggregate short sales further support these conclusions about the style and skill of various fund manager types.
Keywords: Hedge Funds, Mutual Funds, Momentum, Performance
JEL Classification: G11, G12, G14
Suggested Citation: Suggested Citation