Risk factor and industry effects in the cross-country comovement of momentum returns |
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Authors: | Andy Naranjo Burt Porter |
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Institution: | 1. University of Florida, Warrington College of Business, Department of Finance, P.O. Box 117168, Gainesville, FL 32611-7168, USA;2. Iowa State University, College of Business, 3345 Gerdin Business Building, Ames, IA 50011-1350, USA |
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Abstract: | This paper examines the sources of cross-country comovement of momentum returns over the 1975–2004 period. Using data on more than 17,000 individual firms across 100 industries from 40 countries, we document the profitability of country-neutral individual firm, industry, and industry-adjusted return momentum. We show that country-neutral momentum returns are significantly correlated across countries, the correlation is time-varying, and that comovement among industries cannot explain the comovement of country-neutral momentum returns. However, we find that standard risk factor models do explain a significant portion of the cross-country comovement of momentum returns, even though they do not explain average momentum returns. |
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Keywords: | G12 G15 |
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