西南财经大学金融研究院
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Industry herding and momentum strategies
2017-05-03 13:30
        Rıza Demirer 
             Department of Economics & Finance, Southern Illinois University Edwardsville,
  Donald Lien,
               Department of Economics, University of Texas — San Antonio
      Huacheng Zhang
             Institute of Financial Studies, Southwestern University of Finance and Economics

Abstract
This paper evaluates the impact of industry herding on return
momentum. While the findings support that winner industries outperform
loser industries in subsequent months, we find that the
profitability of industry momentum strategies depends on the level
of herding in an industry. Loser industrieswith high level of herding
yield significantly lower subsequent returns than loser industries
with low level of herding while no significant difference in subsequent
returns is observed for winner industries across low and
high herding levels. The asymmetry in the relationship between
herding and momentum returns is in fact the driving factor behind
profitable, zero-cost momentum strategies and suggests that the
level of herding in an industry must be considered in the implementation
of industry momentum strategies.