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2012 Awards for Excellence
Article Type: 2012 Awards for Excellence From: Studies in Economics and Finance, Volume 30, Issue 1
The following article was selected for this year's Outstanding Paper Award for Studies in Economics and Finance
“The intertemporal mechanics of European stock price momentum”
Philip A. StorkSchool of Finance and Risk Management, Faculty of Economics and Business Administration, VU University Amsterdam, Amsterdam, The Netherlands
Purpose – The purpose of this paper is to examine the relationship between a stock market's index returns and its subsequent firm-level momentum profits. This relationship is analysed for each of ten individual European stock markets between 1973 and 2010.
Design/methodology/approach – Using firm-level data, intra-market momentum returns are analysed, using various ranking and holding period combinations. Standard t-tests as well as pooled and country-specific regressions are employed to determine the significance of the non-linear relationship between one-, two- and three-year index returns and subsequent momentum returns.
Findings – Momentum returns following a bull market are positive for all ten stock markets; statistical significance is reached by nine of those ten. Per contrast, momentum returns following a bear market are insignificant for all ten stocks markets, and the average return is negative. Further, in all ten stock markets the momentum profits are lowest following the greatest drops in the index; this effect is significant in eight countries. These results are consistent with the behavioural theories on investors' overconfidence and undue self-attribution.
Practical implications – The paper's findings suggest that investors should refrain from pursuing a momentum strategy in European stock markets shortly after a severe bear market.
Originality/value – This is the first study to investigate the temporal dependence of firm-level momentum returns on preceding index movements in European stock markets.
Keywords European stock markets, Overconfidence, Price momentum, Profit, Self-attribution, Stock returns
This article originally appeared in Volume 28 Number 3, 2011, pp. 217-32 Studies in Economics and Finance
The following articles were selected for this year's Highly Commended Award
“Returns or valuation? Foreign equity investment in the United States”
Joseph J. French and Nazneen Ahmad
This article originally appeared in Volume 28 Number 3, 2011, Studies in Economics and Finance
“Dynamic structure of the US financial systems”
Khaldoun Khashanah and Linyan Miao
This article originally appeared in Volume 28 Number 4, 2011, Studies in Economics and Finance
“Volatility transmission and asymmetric linkages between the stock and foreign exchange markets: a sectoral analysis”
Tian Yong Fu, Mark J. Holmes and Daniel F.S. Choi
This article originally appeared in Volume 28 Number 1, 2011, Studies in Economics and Finance
Dr Liyan YangUniversity Toronto, Canada