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Style and Skill: Hedge Funds, Mutual Funds, and Momentum

Mark Grinblatt (), Gergana Jostova (), Lubomir Petrasek () and Alexander Philipov ()
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Mark Grinblatt: Anderson School of Management, University of California, Los Angeles, Los Angeles, California 90095
Gergana Jostova: School of Business, George Washington University, Washington, District of Columbia 20052
Lubomir Petrasek: Board of Governors of the Federal Reserve System, Washington, District of Columbia 20551
Alexander Philipov: School of Business, George Mason University, Fairfax, Virginia 22030

Management Science, 2020, vol. 66, issue 12, 5505-5531

Abstract: Classifying mandatory 13F stockholding filings by manager type reveals that hedge fund strategies are mostly contrarian, and mutual fund strategies are largely trend following. The only institutional performers—the two thirds of hedge fund managers that are contrarian—earn alpha of 2.4% per year. Contrarian hedge fund managers tend to trade profitably with all other manager types, especially when purchasing stocks from momentum-oriented hedge and mutual fund managers. Superior contrarian hedge fund performance exhibits persistence and stems from stock-picking ability rather than liquidity provision. Aggregate short sales further support these conclusions about the style and skill of various fund manager types.

Date: 2020
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