The overlooked momentum traders in 401(k) plans

Authors

  • Ning Tang Department of Finance, College of Business Administration, San Diego State University

DOI:

https://doi.org/10.61190/fsr.v25i1.3260

Keywords:

Pension fund management, Momentum, Trading, Portfolio performance, 401(k) plan

Abstract

Using a unique dataset on over one million 401(k) traders, we investigate momentum trading in 401(k) plans. We identify momentum traders in each quarter and evaluate how these traders perform. Results indicate the existence of momentum traders. However, there is no evidence that they successfully improve their portfolio performance. Instead, momentum sellers sell the outperformed funds. Overall, momentum traders could lose up to 2.14% per year. In seeking to explain such losses, we observe that 401(k) momentum traders follow a naïve momentum strategy. They do not have the ability to select funds with momentum investing styles but, instead, simply chase past returns.

Downloads

Published

2016-03-30

How to Cite

Tang, N. (2016). The overlooked momentum traders in 401(k) plans. Financial Services Review, 25(1), 51–72. https://doi.org/10.61190/fsr.v25i1.3260

Issue

Vol. 25 No. 1 (2016): Spring 2016

Section

New Original Submission

License

Copyright (c) 2014 Academy of Financial Services

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

Author(s) retain copyright and grant the Journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-NonCommercial 4.0 International License that allows to share the work with an acknowledgment of the work's authorship and initial publication in this Journal.

This license allows the author to remix, tweak, and build upon the original work non-commercially. The new work(s) must be non-commercial and acknowledge the original work.