Momentum Investing and Business Cycle Risk: Evidence from Pole to Pole

Authors: Griffin J.M.¹; Ji X.²; Martin J.S.³

Source: The Journal of Finance, Volume 58, Number 6, December 2003 , pp. 2515-2547(33)

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Abstract:

We examine whether macroeconomic risk can explain momentum profits internationally. Neither an unconditional model based on the Chen, Roll, and Ross (1986) factors nor a conditional forecasting model based on lagged instruments provides any evidence that macroeconomic risk variables can explain momentum. In addition, momentum profits around the world are economically large and statistically reliable in both good and bad economic states. Further, these momentum profits reverse over 1- to 5-year horizons, an action inconsistent with existing risk-based explanations of momentum.

Document Type: Research article

DOI: http://dx.doi.org/10.1046/j.1540-6261.2003.00614.x

Affiliations: 1: McCombs School of Business, The University of Texas at Austin 2: Baruch College, The City University of New York 3: W. P. Carey School of Business, Arizona State University

Publication date: 2003-12-01