Momentum (and Value) Enhanced by Institutional Prediction

Wisdom of the Institutional Crowd: Implications for Anomaly Returns

AuthorsAJ Chen; Gerard Hoberg; Miao Ben Zhang

Paper linkhttps://papers.ssrn.com/sol3/papers.cfm?abstract_id=4207132

This strategy forecasts stock returns by integrating institutional investor signals extracted from Wall Street Journal articles with value and momentum anomalies. Stocks are filtered, scored for institutional relevance, and sorted into portfolios, going long on high-score, high-anomaly stocks and short on high-score, low-anomaly stocks, with monthly rebalancing.Rebalance monthly.

This strategy leverages media coverage of institutional investors’ predictions to forecast stock returns. By quantifying how widely institutional trading insights are shared, it identifies anomalies and predicts price corrections.