Market States and Momentum

We test overreaction theories of short-run momentum and long-run reversal in the cross section of stock returns. Momentum profits depend on the state of the market, as predicted. From 1929 to 1995, the mean monthly momentum profit following positive market returns is 0.93%, whereas the mean profit f...

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Veröffentlicht in:	The Journal of finance (New York) 2004-06, Vol.59 (3), p.1345-1365
Hauptverfasser:	Cooper, Michael J., Gutierrez, Roberto C., Hameed, Allaudeen
Format:	Artikel
Sprache:	eng
Schlagworte:	Behavior Financial portfolios Forecasting models Investment policy Investors Macroeconomic modeling Macroeconomics Mathematical models Modeling Price momentum Profit forecasting Profits Rates of return Securities markets Studies Time series Time series forecasting
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Beschreibung
Zusammenfassung:	We test overreaction theories of short-run momentum and long-run reversal in the cross section of stock returns. Momentum profits depend on the state of the market, as predicted. From 1929 to 1995, the mean monthly momentum profit following positive market returns is 0.93%, whereas the mean profit following negative market returns is -0.37%. The up-market momentum reverses in the long-run. Our results are robust to the conditioning information in macroeconomic factors. Moreover, we find that macroeconomic factors are unable to explain momentum profits after simple methodological adjustments to take account of microstructure concerns.
ISSN:	0022-1082 1540-6261
DOI:	10.1111/j.1540-6261.2004.00665.x