Catalog Home Page

Systematic risk and the performance of mutual funds pursuing momentum and contrarian trades

Cullen, G., Gasbarro, D., Monroe, G.S. and Zumwalt, J.K. (2009) Systematic risk and the performance of mutual funds pursuing momentum and contrarian trades. In: 22nd Australasian Finance and Banking Conference, 16 - 18 December, Sydney, NSW, Australia

[img]
Preview
PDF - Authors' Version
Download (179kB) | Preview

Abstract

We examine mutual fund trading activity to determine whether they rebalance their portfolios towards stocks that were recent superior performers (a momentum strategy) or towards stocks that recently underperformed (a contrarian strategy). Using 2,829 funds with 49,661 fund-periods between 1991 and 2005, we find that around 15% of the funds exhibit contrarian trading behavior with a similar percentage following a momentum strategy. We highlight the importance of a stock’s risk to traders adopting momentum and contrarian strategies. Mutual funds that follow a momentum strategy and acquire high-risk stocks improve their performance, while those following a contrarian strategy in these stocks diminish their performance. Both contrarian and momentum trading behavior by funds persists.

Publication Type: Conference Paper
Murdoch Affiliation: Murdoch Business School
URI: http://researchrepository.murdoch.edu.au/id/eprint/39107
Item Control Page Item Control Page

Downloads

Downloads per month over past year