Market sentiment and mutual fund trading strategies

Nelson Lacey, Qiang Bu

Research output: Contribution to journalArticle

Abstract

Based on a sample of the US equity funds, this paper investigates the performance of both follow-the-leader (momentum) and follow-the-loser (contrarian) trading strategies. We find that similar fund styles tend to be the biggest winners and the biggest losers, and that the follow-the-leader strategy outperforms the follow-the-loser strategy. However, the follow-the-loser strategy beats both the market and the follow-the-leader strategy in major down markets. Using a piecewise linear regression, we also document a relationship between the market and our two trading strategies. Our study suggests that behavioral factors play an important role for funds with extreme performance.

Original languageEnglish (US)
Pages (from-to)208-214
Number of pages7
JournalProblems and Perspectives in Management
Volume8
Issue number3
StatePublished - Jan 1 2010

Fingerprint

market
leader
performance
Mutual funds
Trading strategies
Market sentiment
equity
regression
Factors
Linear regression
Equity
Momentum

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Strategy and Management

Cite this

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Market sentiment and mutual fund trading strategies. / Lacey, Nelson; Bu, Qiang.

In: Problems and Perspectives in Management, Vol. 8, No. 3, 01.01.2010, p. 208-214.

Research output: Contribution to journalArticle

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