The 52-week high, momentum, and predicting mutual fund returns

Sapp, Travis

doi:10.1007/s11156-010-0199-7

“…These findings contribute to the various strands of academic literature which either explore the empirical usefulness of alpha as a measure of fund performance (Chung et al, 2015) or which implement conventional technical strategies often used by practitioners in order to predict mutual fund returns (Sapp, 2011). They also contribute to studies that dissect the various determinants of managers' buying and selling decisions and the extent to which such decisions affect overall fund performance (Ferruz et al, 2010;Rohleder et al, 2017;Tosun, 2017;Popescu and Xu, 2018;Wang and Yu, 2018).…”

Section: Introductionmentioning

confidence: 65%

In search of winning mutual funds in the Chinese stock market

Koutmos

¹

,

Wu

²

,

Zhang

³

2019

Rev Quant Finan Acc

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This paper provides a methodological approach, based on the false discovery rate (FDR) of Barras et al. (2010), by which investors can successfully select winning mutual funds and fund managers in China. Our approach allows investors to distinguish between skilled and lucky mutual funds and fund managers and, using this information, to calibrate the proportion of their portfolio funds that are invested in the market index versus funds invested in skilled mutual funds. This feature in our approach can accommodate unique risk appetites and diversification requirements. When accounting for actual transaction costs which individual and institutional investors face in China, we show that our FDR approach can yield positive and economically significant risk-adjusted returns across various rebalancing frequencies. Our approach fares well when compared with naive historical return-based approaches for ranking mutual funds.

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“…1 The momentum effect, in turn, refers to the tendency of stocks with high short-term past returns ("winners") to outperform stocks with low past returns ("losers"). This anomalous continuation of short-term returns was first documented by Jegadeesh and Titman (1993), and has since been extensively explored in various international stock markets, across different types of stocks, industries, and asset classes as well as over different time periods (e.g., Rouwenhorst 1998;Moskowitz and Grinblatt 1999;Jegadeesh and Titman 2001;Fama and French 2008;Sapp 2011;Jiang et al 2012;Yu 2012;Asness et al 2013;Jostova et al 2013; Barosso and Santa-Clara 2015;Hur and Singh 2016;Bhattacharya et al 2017;Grobys et al 2018). 2 In this paper, we take a novel perspective on the value and momentum effects by focusing on volatility spillovers between these two strategies.…”

Section: Introductionmentioning

confidence: 90%

Another Look at Value and Momentum: Volatility Spillovers

Grobys

¹

,

Vähämaa

²

2017

SSRN Journal

1

0

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This paper examines volatility interdependencies between value and momentum returns. Using U.S. data over the period 1926-2015, we document persistent periods of low and high volatility spillovers between value and momentum strategies. Moreover, we find that the intensity of the volatility spillovers may change substantially in very short periods of time and that these shifts in spillover intensity can be linked to prominent economic events and financial market turmoil. Our results further demonstrate that value returns increase and momentum returns decrease monotonically with increasing volatility spillovers between the two strategies. Given this linkage between spillover intensity and returns, we propose a simple trading strategy which utilizes a volatility spillover index for allocating funds between value and momentum portfolios. The proposed trading strategy outperforms value and momentum strategies and generates payoffs that are not subject to option-like behavior.

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“…1 The momentum effect, in turn, refers to the tendency of stocks with high short-term past returns ("winners") to outperform stocks with low past returns ("losers"). This anomalous continuation of short-term returns was first documented by Jegadeesh and Titman (1993), and has since been extensively explored in various international stock markets, across different types of stocks, industries, and asset classes as well as over different time periods (e.g., Rouwenhorst 1998;Moskowitz and Grinblatt 1999;Jegadeesh and Titman 2001;Fama and French 2008;Sapp 2011;Jiang et al 2012;Yu 2012;Asness et al 2013;Jostova et al 2013;Barosso and Santa-Clara 2015;Hur and Singh 2016;Bhattacharya et al 2017;Grobys et al 2018). 2 In this paper, we take a novel perspective on the value and momentum effects by focusing on volatility spillovers between these two strategies.…”

Section: Introductionmentioning

confidence: 90%

Another look at value and momentum: volatility spillovers

Grobys

¹

,

Vähämaa

²

2020

Rev Quant Finan Acc

7

0

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This paper examines volatility interdependencies between value and momentum returns. Using U.S. data over the period 1926-2015, we document persistent periods of low and high volatility spillovers between value and momentum strategies. Moreover, we find that the intensity of the volatility spillovers may change substantially in very short periods of time and that these shifts in spillover intensity can be linked to prominent economic events and financial market turmoil. Our results further demonstrate that value returns increase and momentum returns decrease monotonically with increasing volatility spillovers between the two strategies. Given this linkage between spillover intensity and returns, we propose a simple trading strategy which utilizes a volatility spillover index for allocating funds between value and momentum portfolios. The proposed trading strategy outperforms value and momentum strategies and generates payoffs that are not subject to option-like behavior.Keywords Asset pricing · Value effect · Momentum effect · Volatility spillovers · Volatility spillover index JEL Classification G11 · G12 · G14

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The 52-week high, momentum, and predicting mutual fund returns

Abstract: Mutual fund selection, Stock return momentum, Momentum trading, Momentum profits, 52-Week high, Return predictability, Smart money effect, G11, G20,

Cited by 18 publications

References 41 publications

In search of winning mutual funds in the Chinese stock market

In search of winning mutual funds in the Chinese stock market

Another Look at Value and Momentum: Volatility Spillovers

Another look at value and momentum: volatility spillovers

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