Thus, after buying into winning funds, investors unwittingly benefit from momentum returns on winning stocks. To test this reasoning, Sapp and Tiwari calculate abnormal performance following money f lows with and without accounting for the momentum factor, and find that inclusion of the momentum factor in the performance evaluation proce- dure eliminates outperformance of high f low funds. In addition, they show that investors are not deliberate in seeking to benefit from stock-level momentum: More popular funds do not have higher exposure to themomentumfactor at the time they are selected. Wermers (2003) further contributes to this discussion by examining fund portfolio holdings and establishing that fund managers who have recently.
