Abstract

https://ssrn.com/abstract=5686
 


 



Momentum Investment Strategies, Portfolio Performance, and Herding: A Study of Mutual Fund Behavior


Mark Grinblatt


University of California, Los Angeles (UCLA) - Finance Area; Yale University - International Center for Finance; National Bureau of Economic Research (NBER)

Sheridan Titman


University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Russ Wermers


University of Maryland - Robert H. Smith School of Business

September 1994


Abstract:     
We examine the investment strategies of 155 mutual funds over the 1975-84 period to determine the extent to which the funds purchased stocks based on their past returns, and to determine the relation of this behavior to their observed portfolio performance. We find that about 77% of these mutual funds were "momentum investors", buying stocks that were past winners; however, they did not systematically sell past losers. On average, these "trend-followers" realized significantly better performance than the remaining funds. We also find that the mutual funds exhibited herding behavior, and that the tendency of a fund to herd in its trades was strongly correlated with its tendency to buy past winners as well as with its portfolio performance. Consistent with the evidence on trend-following, herding into past winners was stronger than herding into past losers.

JEL Classification: G10


Not Available For Download

Date posted: September 7, 1999  

Suggested Citation

Grinblatt, Mark and Titman, Sheridan and Wermers, Russ, Momentum Investment Strategies, Portfolio Performance, and Herding: A Study of Mutual Fund Behavior (September 1994 ). Available at SSRN: https://ssrn.com/abstract=5686

Contact Information

Mark Grinblatt
University of California, Los Angeles (UCLA) - Finance Area ( email )
Los Angeles, CA 90095-1481
United States
310-825-1098 (Phone)
310-206-5455 (Fax)
Yale University - International Center for Finance
Box 208200
New Haven, CT 06520-8200
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Sheridan Titman
University of Texas at Austin - Department of Finance ( email )
Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Russell R. Wermers
University of Maryland - Robert H. Smith School of Business ( email )
Department of Finance
College Park, MD 20742-1815
United States
301-405-0572 (Phone)
301-405-0359 (Fax)
HOME PAGE: http://www.rhsmith.umd.edu/finance/rwermers/
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