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Momentum Profits, Factor Pricing, and Macroeconomic Risk

2009
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Release : 2009
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Book Synopsis Momentum Profits, Factor Pricing, and Macroeconomic Risk by : Laura Xiaolei Liu

Download or read book Momentum Profits, Factor Pricing, and Macroeconomic Risk written by Laura Xiaolei Liu. This book was released on 2009. Available in PDF, EPUB and Kindle. Book excerpt: We study the connection between momentum portfolio returns and shifts in factor loadings on the growth rate of industrial production. Winners have temporarily higher loadings than losers. The loading spread derives mostly from the high, positive loadings of winners. Small stocks have higher loadings than big stocks, and value stocks have higher loadings than growth stocks. Using standard multifactor tests, we present evidence that the growth rate of industrial production is a priced risk factor. In most of our tests, however, the combined effect of factor pricing and risk shifts does not explain a large fraction of momentum returns.

Momentum Profits and Macroeconomic Risk

2005 Econometric models
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Release : 2005
Genre : Econometric models
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Book Synopsis Momentum Profits and Macroeconomic Risk by : Laura X.L. Liu

Download or read book Momentum Profits and Macroeconomic Risk written by Laura X.L. Liu. This book was released on 2005. Available in PDF, EPUB and Kindle. Book excerpt: "Previous work shows that the growth rate of industrial production is a common macroeconomic risk factor in the cross-section of expected returns. We demonstrate the connection between momentum profits and shifts in factor loadings on this macroeconomic variable. Winners have temporarily higher loadings on the growth rate of industrial production than losers. The loading dispersion derives mostly from the high, positive loadings of winners. Depending on model specification, this loading dispersion can explain up to 40% of momentum profits"--National Bureau of Economic Research web site.

Momentum Profits and Macroeconomic Risk

2010
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Release : 2010
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Book Synopsis Momentum Profits and Macroeconomic Risk by : Laura Xiaolei Liu

Download or read book Momentum Profits and Macroeconomic Risk written by Laura Xiaolei Liu. This book was released on 2010. Available in PDF, EPUB and Kindle. Book excerpt: Previous work shows that the growth rate of industrial production is a common macroeconomic risk factor in the cross-section of expected returns. We demonstrate the connection between momentum profits and shifts in factor loadings on this macroeconomic variable. Winners have temporarily higher loadings on the growth rate of industrial production than losers. The loading dispersion derives mostly from the high, positive loadings of winners. Depending on model specification, this loading dispersion can explain up to 40% of momentum profits.

Macroeconomic Risk and Seasonality in Momentum Profits

2017
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Release : 2017
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Book Synopsis Macroeconomic Risk and Seasonality in Momentum Profits by : Susan Ji

Download or read book Macroeconomic Risk and Seasonality in Momentum Profits written by Susan Ji. This book was released on 2017. Available in PDF, EPUB and Kindle. Book excerpt: We contribute to the growing debate on the relation between macroeconomic risk and stock price momentum. Not only is momentum seasonal, so is its net factor exposure. We show that winners and losers only differ in macroeconomic factor loadings during January, the one month when losers overwhelmingly outperform winners. In the remainder of the year, when momentum does exist, winner and loser factor loadings offset nearly completely. Furthermore, the magnitude of macroeconomic risk premia appears to seasonally vary contra momentum. In contrast, the relatively new profitability factor does a much better job of capturing the described seasonality.

Momentum Investing and Business Cycle Risk

2015
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Release : 2015
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Book Synopsis Momentum Investing and Business Cycle Risk by : John M. Griffin

Download or read book Momentum Investing and Business Cycle Risk written by John M. Griffin. This book was released on 2015. Available in PDF, EPUB and Kindle. Book excerpt: We examine whether momentum profits globally can be explained by macroeconomic risk and address in part whether momentum returns are consistent with risk-based explanations. Profits to momentum strategies only weakly co-move among 40 countries, whether within regions or across continents. Internationally, momentum profits bear basically no statistically or economically significant relation to the Chen, Roll, and Ross (1986) macroeconomic factors. Performance of a forecasting model based on lagged instrumental variables also indicates that there is no measurable relation between macroeconomic risk and momentum either abroad or in the U.S. Globally, momentum profits are large and statistically reliable in periods of both negative and positive economic growth; these momentum profits reverse over one- to five-year horizons, an action inconsistent with current risk-based explanations.

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