Abstract
Purpose: Investigate the behaviour of the cross-sectional stock momentum anomaly in market states.
Originality: Methodological setup designed for a more thorough treatment of the topic than existing literature:
• Demonstration that market state definition in common use is flawed and results in spurious conclusions, and implementation of an alternative measure;
• Examination of role of market state both before and after formation;
• Define momentum strategies in a form that allows market states to be uniquely assigned, and which avoid econometric problems described in the literature;
• Risk adjustment that respects the inherently time-varying nature of momentum returns.
Key literature / theoretical perspective: Motivated by literature seeking to explain momentum anomaly within risk-based or behavioural frameworks.
Design/methodology/approach: See “Originality” above.
Findings: In contrast to a body of prior literature, momentum returns are not strongly linked to market state; Momentum returns are linked to turning points.
Research limitations/implications: Findings reduce support for certain behavioural explanations of momentum anomaly.
Practical and Social implications: Implications for practitioner implementation of momentum strategies.
Original language | English |
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Pages (from-to) | 42-43 |
Number of pages | 2 |
Journal | Expo 2010 Higher Degree Research : book of abstracts |
Publication status | Published - 2010 |
Event | Higher Degree Research Expo (6th : 2010) - Sydney Duration: 19 Nov 2010 → 19 Nov 2010 |
Keywords
- momentum
- market states
- behavioural finance