Mutual Fund Managers' Choice of Momentum Strategy Pre/during/Post Financial Crisis

Abstract

This paper provide evidence of momentum strategy selection and investment strategy switch under different market state for 207 mutual funds. The test are designed to examine the impact of different strategy and evaluate the performance under specific conditions. The study in this paper confirm the state dependence of investment strategy. By the data seized in the test, fund managers prefer momentum strategy before the financial crisis and give it up during the recession, then turns to contrarian in the following period. The optimal path of strategy selection combination and for the whole sample period also given in the results. The paper also evaluate the decision made by fund managers, compared with different peer groups and time horizon.