Firm characteristics that drive the momentum pattern in the UK stock market |
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Authors: | Antonios Siganos |
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Institution: | 1. Accounting and Finance Division, Adam Smith Business School , University of Glasgow , West Quadrangle, Main Building, University Avenue, Glasgow , G12 8QQ , UK a.siganos@accfin.gla.ac.uk |
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Abstract: | Previous studies have estimated the company characteristics of previous winners and losers to explore the momentum effect. Using UK data, this study focuses on the characteristics of companies that actually generate the momentum pattern. These are previous winners who keep performing well (WW) and past losers who consistently perform poorly (LL). This study illustrates that WW and LL firms may exhibit market-based characteristics similar to those of young, low-priced, small capitalisation companies, but that there are significant differences. Accounting and fundamental signals (e.g. profitability, value/growth) tend to distinguish winners from losers. Based on firm characteristics, we further develop investment strategies that can outperform significantly the profitability of the momentum strategy. |
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Keywords: | Stock market efficiency Momentum effect Logit analysis Missing data |
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