Economic activity and momentum profits: Further evidence

Research output: Contribution to journalArticleScientificpeer-review

24 Citations (Scopus)


We show that economic activity plays an important role in explaining momentum-based anomalies. A simple two-factor model containing the market and alternative indicators of economic activity as risk factors—industrial production, capacity utilization rate, retail sales, and a broad economic index—offers considerable explanatory power for the cross-section of price and industry momentum portfolios. Hence past winners enjoy higher average returns than past losers because they have larger macroeconomic risk. The model compares favorably with popular multifactor models used in the literature. Moreover, our model is consistent with Merton’s Intertemporal CAPM framework, since the macro variables forecast stock market volatility and future economic activity.
Original languageEnglish
Peer-reviewed scientific journalJournal of Banking and Finance
Issue numberMarch
Pages (from-to)466-482
Number of pages17
Publication statusPublished - 2018
MoE publication typeA1 Journal article - refereed


  • 512 Business and Management
  • Momentum
  • Industry momentum
  • Asset pricing
  • Cross-section of stock returns
  • Intertemporal CAPM
  • Macro risk factors
  • Linear multifactor models
  • Predictability of stock returns


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