PT - JOURNAL ARTICLE AU - Zhipeng Yan AU - Yan Zhao AU - Libo Sun TI - Industry Herding and Momentum AID - 10.3905/joi.2012.21.1.089 DP - 2012 Feb 29 TA - The Journal of Investing PG - 89--96 VI - 21 IP - 1 4099 - https://pm-research.com/content/21/1/89.short 4100 - https://pm-research.com/content/21/1/89.full AB - Theoretical models on herd behavior predict that under different assumptions, herding can drive prices away from (or toward) fundamentals and reduce (or enhance) market efficiency. In this article, we study the joint effect of herding and momentum at the industry level. We find that the momentum effect is magnified when there is a low level of investor herding. Herd behavior in investors helps move asset prices toward fundamentals, enhances market efficiency, and reduces the momentum effect. A trading strategy taking a long position in winner industries and a short position in loser industries when the herding level is low can generate significant returns.TOPICS: In portfolio management, portfolio construction, analysis of individual factors/risk premia