Economic activity and momentum profits: Further evidence

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Sammanfattning

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.
OriginalspråkEngelska
Referentgranskad vetenskaplig tidskriftJournal of Banking and Finance
Volym88
UtgåvaMarch
Sidor (från-till)466-482
Antal sidor17
ISSN0378-4266
DOI
StatusPublicerad - 2018
MoE-publikationstypA1 Originalartikel i en vetenskaplig tidskrift

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  • 512 Företagsekonomi

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