Effectiveness of Momentum based on Industry Herding : Evidence from Tehran Stock Exchange

This research was designed to examine the profitability of the momentum strategy with regard to Industry herding. The existence of momentum, herding and imitation from each other's behavior can intensify the results of momentum strategies. Therefore, using the monthly returns of the companies listed at TSE during the period from 2008 to 2017, the behavior of winner and loser portfolios has been investigated considering the Industry herding. The results showed there is short-term returns of momentum in winner portfolios (in high level of industry herding) higher compared to loser portfolios(in low level of industry herding). Although it is significance for periods of one to two months. Also, the comparison of winner companies with high and low herding shows the short-term momentum.The comparison of the future return of loser and winner companies (with low level of industry herding) also shows that there is a momentum return in some periods, also there is not a obvious pattern. Ultimately, most of the momentum effect relates to the long position of winner (with high level of herding) and the short position of loser (with low level of herding).