Momentum Strategies of German Mutual Funds; we detect significant momentum behavior among funds with a European and global equity focus, and among funds predominantly investing in Asia; we do not find momentum trading funds to outperform the other fund

March 5, 2013 Leave a comment

Momentum Strategies of German Mutual Funds

Alexander Franck  University of Giessen – Department of Financial Services

Andreas Walter  University of Giessen – Department of Financial Services

Johannes Witt  Independent

February 1, 2013

Abstract: 
The existence of the momentum effect in stock returns has been documented for the U.S. (e.g., Jegadeesh and Titman, 1993) and many other national equity markets worldwide (e.g., Griffin et al., 2003). However, little is known about the active employment of momentum strategies among institutional investors outside the U.S. In this respect, we provide 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, and among funds predominantly investing in Asia. In contrast, German funds do not seem to employ momentum strategies when trading domestic stocks. While only half of the funds across the entire 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.

Filed under Research

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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