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Momentum strategies of German mutual funds

Author

Listed:
  • Alexander Franck

    ()

  • Andreas Walter
  • Johannes Witt

Abstract

The existence of the momentum effect in stock returns has been documented for the US (e.g., Jegadeesh and Titman in J. Finance 48(1), 65–91, 1993 ) and many other national equity markets worldwide (e.g., Griffin et al. in J. Finance 58(6), 2515–2547, 2003 ). However, little is known about the active employment of momentum strategies among institutional investors outside the US. This paper provides first evidence of momentum behavior among German mutual funds. We find the fund trades to follow stock returns on an aggregated institutional level. Moreover, we detect significant momentum behavior among funds with a European and global equity focus, as well as among funds predominantly investing in Asia. In contrast, German funds do not seem to engage in momentum strategies when trading domestic stocks. While only half the funds in our sample trade in accordance with past returns, 66 % of the funds within the largest size quintile follow momentum strategies. Finally, we do not find momentum trading funds to outperform the other funds. Copyright Swiss Society for Financial Market Research 2013

Suggested Citation

  • Alexander Franck & Andreas Walter & Johannes Witt, 2013. "Momentum strategies of German mutual funds," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 27(3), pages 307-332, September.
  • Handle: RePEc:kap:fmktpm:v:27:y:2013:i:3:p:307-332
    DOI: 10.1007/s11408-013-0211-z
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    References listed on IDEAS

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    Keywords

    Momentum investment strategies; Behavioral finance ; Asset allocation; Mutual funds; D82; G11; G23;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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