An empirical research of the domestic mutual funds momentum effect and the relationship between it’s stock holding

• Main Authors: Ching-Chih Wu, 吳清池
• Other Authors: Tung-Hsiao Yang
• Format: Others
• Language: zh-TW
• Online Access: http://ndltd.ncl.edu.tw/handle/92252140216624199460

碩士 === 國立中興大學 === 高階經理人碩士在職專班 === 97 === This paper analyzes the price momentum effect in the domestic open-ended equity mutual funds in Taiwan, and connects the effect to their stock holdings. Using the average monthly returns of these funds from January 2000 to December 2008, we apply the momentum investment strategies in Jegadeesh and Titman (1993) and checks if there exists the momentum effect. The main empirical findings are summarized as follows: 1. We construct the investment portfolios based on the winner and loser of market performance during the previous observation period. Within different observation periods, three-, six-, nine-, and twelve-month, we find significantly positive return in three- and six-month holding periods. However, holding more than nine months, the momentum effect becomes insignificant. Moreover, the positive portfolio returns changes to negative with longer holding period. 2. The momentum effect existing in three- and six-month holding periods implies that the portfolio returns cannot reflect the relative information perfectly. That means the funds with better performance will perform better continuously and those with poor performance will keep their poor performance for a period of time. Therefore, investors can take advantage of the momentum effect by buying funds with good past performance and selling poor ones. The strategy, however, may not work well in the longer holding period. 3. The funds with better performance for one year have the momentum effect in different holding periods. This implies that funds with good performance in the longer period can keep their performance in the following months. This indicates that investors should take the funds past performance into account for at least one year to extract the positive returns of momentum effect. 4. By analyzing the turnover of holding stocks in these funds, we find that many funds keep the same stock holding for a long period of time. It is possible that part of momentum effect comes from these consistent stock holding. Therefore, investors can also take the information into account when they make their investment decisions. The momentum effect in listed stocks could still exist in closed-end mutual funds in Taiwan.