An Institutional Theory of Momentum and Reversal

• 成果类型: Article
• 署名作者: Vayanos, Dimitri; Woolley, Paul
• 署名单位: University of London; London School Economics & Political Science; National Bureau of Economic Research
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hht014
• 发表日期: 2013
• 页码: 1087
• 关键词: MUTUAL FUND PERFORMANCE; STOCK; returns; MARKET; predictability; GROWTH; LIMITS; style; MODEL

摘要

We propose a theory of momentum and reversal based on flows between investment funds. Flows are triggered by changes in fund managers' efficiency, which investors either observe directly or infer from past performance. Momentum arises if flows exhibit inertia, and because rational prices underreact to expected future flows. Reversal arises because flows push prices away from fundamental values. Besides momentum and reversal, flows generate comovement, lead-lag effects, and amplification, with these being larger for high idiosyncratic risk assets. A calibration of our model using evidence on mutual fund returns and flows generates sizeable Sharpe ratios for momentum and value strategies.