Industry herding and momentum strategies

Demirer, Rıza; Lien, Donald; Zhang, Huacheng

doi:10.1016/j.pacfin.2015.02.010

Cited by 41 publications

(37 citation statements)

References 45 publications

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“…Mutual fund herding has an asymmetric effect on loser stock portfolio returns, and the profitability of the investment portfolio depends on the degree of mutual fund herding. This finding is consistent with a previous study (Demirer et al 2015), which found asymmetry between herding and momentum. Table 4 presents empirical evidence concerning return on zero-cost portfolios.…”

Section: Effect Of Degree Of Herding On Investment Portfoliossupporting

confidence: 94%

“…In the literature (Demirer et al, 2015), the CSSD (Cross-Sectional Standard Deviation) and the AF is the adjustment factor that was defined by Lakonishok et al (1992).…”

Section: Herding Effectmentioning

confidence: 99%

“…Herding behavior is defined as the copying by investors of the behaviors of other investors and the making of similar decisions. The literature (Christie & Huang, 1995;Demirer et al, 2015;Hung et al, 2010;Lakonishok et al, 1992;Nofsinger & Sias, 1999;Sias, 2004) has shown significant institutional herding behavior. Nofsinger and Sias (1999) proposed that the effect of the herding behavior of institutional investors exceeds that of individual investors.…”

Section: Introductionmentioning

confidence: 99%

“…Nofsinger and Sias (1999) proposed that the effect of the herding behavior of institutional investors exceeds that of individual investors. Demirer et al (2015) found that the profitability of an investment strategy depends on the degree of herding. Thus, this study evaluates the effect of mutual fund herding on the contrarian strategy in Chinese stock market.…”

Section: Introductionmentioning

confidence: 99%

“…Grinblatt and Moskowitz (1999) constructed zero-cost portfolios using industrial stocks. Subsequently, Demirer et al (2015) formed a portfolio based on the asymmetric relationship between herding and momentum returns and suggested the implementation of zero-cost portfolios. However, few investigations have considered herding behavior in relation to the use of a contrarian strategy to build zero-cost portfolios 2 .…”

Section: Introductionmentioning

confidence: 99%

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Mutual fund herding behavior and investment strategies in Chinese stock market

Lee

Chen

2018

Investment Management and Financial Innovations

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This investigation studies the impact of mutual fund herding on the returns achieved by contrarian strategy from 1990 to 2015 in the Chinese stock market. The relationship between the profit gained by the contrarian strategy and the macroeconomic environment is also examined. First, the returns of the contrarian strategy in China's stock market are found to be significant. Second, most loser stocks with a high degree of mutual fund herding outperform loser stocks with a low degree of mutual fund herding, revealing that the profitability of an investment portfolio depends on the degree of mutual fund herding. Third, investors should buy loser stocks with a high degree of herding and sell winner stocks with a low degree of herding during a two-year formation period, over which zero-cost contrarian strategies yield the significantly highest return. Finally, the payoff of contrarian strategies is positively related to the herding effect and negatively related to macroeconomic variables.

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Section: Effect Of Degree Of Herding On Investment Portfoliossupporting

confidence: 94%

“…In the literature (Demirer et al, 2015), the CSSD (Cross-Sectional Standard Deviation) and the AF is the adjustment factor that was defined by Lakonishok et al (1992).…”

Section: Herding Effectmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Mutual fund herding behavior and investment strategies in Chinese stock market

Lee

Chen

2018

Investment Management and Financial Innovations

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The untold story of commodity futures in China

Fan

Zhang

2019

Journal of Futures Markets

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We investigate the behavior of commodity futures risk premia in China. In the presence of retail‐dominance and barriers‐to‐entry, the term structure and momentum premia remain persistent, whereas hedging pressure, skewness, volatility, and liquidity premia are distorted by time‐varying margins and strict position limits. Furthermore, open interest, currency, and inflation premia are sensitive to institutional settings. The observed premia cannot be attributed to common risks, sentiment, transactions costs, or data‐snooping, but are related to liquidity, anchoring, and regulation‐induced limits‐to‐arbitrage. We highlight the distinctive features of Chinese futures markets and assess the challenges posed to theories of commodity risk premia.

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Market frictions and momentum premium: does stock mispricing matter? Evidence from China

Tarek,

Ali,

Mohamed

2023

J Corp Accounting Finance

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This study examines if both market frictions and stock mispricing provide better explanation of the momentum premium, compared to the conventional asset pricing models. Using a large sample of 3727 companies listed on the Chinese stock market, we show that winner stocks are associated with larger market frictions and stock mispricing. Our findings reveal new empirical evidence that momentum premium can be attributed to market friction risk‐factor but additionally explained by a mispricing component.

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Industry herding and momentum strategies

Cited by 41 publications

References 45 publications

Mutual fund herding behavior and investment strategies in Chinese stock market

Mutual fund herding behavior and investment strategies in Chinese stock market

The untold story of commodity futures in China

Market frictions and momentum premium: does stock mispricing matter? Evidence from China

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