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Momentum Effect (momentum + effect)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Conditional Asset Pricing and Stock Market Anomalies in Europe

EUROPEAN FINANCIAL MANAGEMENT, Issue 2 2010
Rob Bauer
G12; G14 Abstract This study provides European evidence on the ability of static and dynamic specifications of the Fama-French (1993) three-factor model to price 25 size-B/M portfolios. In contrast to US evidence, we detect a small-growth premium and find that the size effect is still present in Europe. Furthermore, we document strong time variation in factor risk loadings. Incorporating these risk fluctuations in conditional specifications of the three-factor model clearly improves its ability to explain time variation in expected returns. However, the model still fails to completely capture cross-sectional variation in returns as it is unable to explain the momentum effect. [source]

An Analysis of the Magnet Effect under Price Limits,

INTERNATIONAL REVIEW OF FINANCE, Issue 1-2 2009
DAPHNE YAN DU
ABSTRACT Using the Korea Stock Exchange's transaction data and limit order book, we document the accelerating patterns of market activity before limit hits. We confirm the existence of the magnet effect from several key market microstructure variables, using a parsimonious quadratic function of the time until the price limit hit. In addition, this paper is the first to isolate the intraday momentum effect from the magnet effect during the period before stock prices hit daily price limits. [source]

Institutional Trading and Price Momentum

INTERNATIONAL REVIEW OF FINANCE, Issue 1-2 2008
CHIH-HSIEN JERRY YU
ABSTRACT This paper aims to explore the effect of institutional trading on the two asymmetric phenomena found by Lee and Swaminathan: (1) asymmetric price momentum: price momentum is more pronounced among high-turnover stocks; (2) asymmetric return phenomenon: low-turnover stocks tend to outperform high-turnover stocks. Lee and Swaminathan use a ,momentum life cycle' to explain the asymmetric momentum effect while attributing the asymmetric return phenomenon to the analysts' overestimating (underestimating) the future profitability of high (low)-turnover firms. However, it essentially needs trading activity to induce both of the above asymmetric results. Because institutional investors exhibit a momentum trading pattern and the trading behavior of institutional investors may have a huge impact on the movement of stock prices, institutional trading may be one of the major driving forces leading to both of the above asymmetric patterns. The empirical results show that, first of all, after controlling for the turnover, the price momentum is still more pronounced among stocks with higher institutional ownership, while high-turnover stocks no longer exhibit a pronounced momentum effect after controlling for the institutional ownership. Furthermore, stocks with higher institutional ownership have better return performance in any of the turnover groups. While low-turnover stocks still outperform high-turnover stocks after controlling for the institutional ownership level, for some winner stocks this is no longer true. The results suggest that the asymmetric momentum effect is not induced by a stock's turnover, but rather it is driven by institutional trading. Turnover is only a proxy for institutional trading. That is, turnover per se has no economic significance in such a momentum phenomenon. [source]

The Long-Lasting Momentum in Weekly Returns

THE JOURNAL OF FINANCE, Issue 1 2008
ROBERTO C. GUTIERREZ JR
ABSTRACT Reversal is the current stylized fact of weekly returns. However, we find that an opposing and long-lasting continuation in returns follows the well-documented brief reversal. These subsequent momentum profits are strong enough to offset the initial reversal and to produce a significant momentum effect over the full year following portfolio formation. Thus, ex post, extreme weekly returns are not too extreme. Our findings extend to weekly price movements with and without public news. In addition, there is no relation between news uncertainty and the momentum in 1-week returns. [source]

UNDERSTANDING SIZE AND THE BOOK-TO-MARKET RATIO: AN EMPIRICAL EXPLORATION OF BERK'S CRITIQUE

THE JOURNAL OF FINANCIAL RESEARCH, Issue 4 2005
Xinting Fan
Abstract Because they are scaled by price, the ability of size (i.e., the market capitalization of a firm) and the book-to-market equity ratio to determine expected returns may, according to Berk (1995), reflect only a simultaneity bias. The two-stage least squares approach is used to control for this bias and to investigate the economic meanings of these variables. We discover that size and the book-to-market ratio contain distinct and significant components of financial distress, growth options, the momentum effect, liquidity, and firm characteristics. Our findings support Berk in his contention that that size and the book-to-market ratio reflect a combination of different economic mechanisms that are misspecified in the expected return process. [source]