This paper examines the sources of momentum profits of countries exhibiting and non-exhibiting momentum and compares the differences in the underlying factors determining momentum profits between these two group countries. We use monthly stock returns of fourteen major countries. We find remarkable differences in the decomposed components between these two group countries. Countries exhibiting momentum show that the cross sectional dispersion in unconditional mean returns dominates the negative contribution by the part reflecting the intertemporal behavior of asset returns. However, this is not the case in countries exhibiting no momentum. Furthermore, countries with greater relative contribution from the cross-sectional variance in unconditional mean returns tend to have greater momentum profits. These results are robust in subperiods. Our empirical results indicate that intermediate-term return-based strategies can be profitable when the cross-sectional dispersion in unconditional mean returns is larger than the part reflecting the intertemporal behavior of asset returns. Therefore, our results might support the risk-based explanations for the momentum phenomenon rather than the behavioral finance-based explanations.
JEL Classification: G12, G14
Key words: Price momentum; Decomposition of momentum profits; Cross-sectional dispersion in expected returns; Intertemporal stock returns
학회소식
공지사항
[2011년 제 4차] Sources of Momentum Profits in International Stock
작성자 : 관리자
조회수 : 1117
게시일 :
2011-12-07