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1 – 10 of over 25000Somchai Supattarakul and Sarayut Rueangsuwan
Prior research on meeting or beating earnings thresholds documents that firms with earnings momentum are awarded with valuation premiums. However, it is unclear from this strand…
Abstract
Purpose
Prior research on meeting or beating earnings thresholds documents that firms with earnings momentum are awarded with valuation premiums. However, it is unclear from this strand of literature why this is the case. Therefore, this study aims to investigate the effects of time-varying earnings persistence on earnings momentum and their pricing effects.
Design/methodology/approach
This study exploits a firm that reports earnings momentum as research setting to examine whether earnings persistence is significantly higher for firms with consecutive earnings increases. In addition, it investigates a relation between earnings momentum and fundamentals-driven earnings persistence and estimates return associations of earnings momentum conditional on economic-based persistence of earnings.
Findings
The empirical evidence suggests that firms with earnings momentum reflect higher time-varying earnings persistence. It further reveals that longer duration of earnings momentum is associated with higher fundamentals-driven earnings persistence. More importantly, valuation premiums are exclusively assigned to earnings momentum determined by strong firm fundamentals, not momentum itself.
Originality/value
This study provides new empirical evidence that valuation premiums accrued to firms with earnings momentum are conditional on time-varying earnings persistence. The research implications are relevant to investors, regulators and auditors, as the results bring conclusions that earnings momentum reflects successful business models not poor accounting quality. This leads to a more complete view of earnings momentum and helps allocate resources when evaluating earnings-momentum firms.
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This paper shows the momentum strategies that selected stocks based on their returns from a past 1 week generate long lasting significant abnormal returns. I observe the negative…
Abstract
This paper shows the momentum strategies that selected stocks based on their returns from a past 1 week generate long lasting significant abnormal returns. I observe the negative momentum profit from 1 week momentum portfolio and it disappears when the holding period is longer than 22 week.
In addition, I empirically shows that the weekly momentum strategies are able to generate negative profits also after the financial crisis. it is opposite result with literature, reported positive momentum after the financial crisis, I realize this result due to the characteristic of short term weekly momentum and market adjust returns. The price limit is one of the big features of Korean stock market. I consider the set of sample period by change of price limit. I find the positive momentum profits only in the period of narrow price limit range. For the check on the relation between liquidity and profit of momentum strategy, I employ the illiquid measure of Amihud (2002). I find that the strong and long lasting negative momentum profit from illiquid stock portfolio. This result implied that liquidity enhances the profit of momentum.
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Mohamed Sahbi Nakhli and Lotfi Belkacem
The purpose of this paper is to test the performance of momentum strategies and identify the sources of their profits.
Abstract
Purpose
The purpose of this paper is to test the performance of momentum strategies and identify the sources of their profits.
Design/methodology/approach
To identify the main source of momentum profits, first, the bootstrap method with replacement was used. Then, to eliminate the existence of the small sample bias, the bootstrap method without replacement and the block bootstrap method were employed. In this case, when the authors draw the observations without replacement the random effect is reduced, whereas the resampling procedure is based on the random draw.
Findings
The empirical results show the existence of a small sample bias in the bootstrap method with replacement, and that the time‐series relations of stock returns are the main source of momentum profits.
Originality/value
To ensure the random effect of the draws, the authors develop a new resampling procedure called the mixed bootstrap method.
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Michael E. Drew, Madhu Veeraraghavan and Min Ye
The purpose of this paper is to investigate the profitability of momentum investment strategy and the predictive power of trading volume for equities listed in the Australian…
Abstract
Purpose
The purpose of this paper is to investigate the profitability of momentum investment strategy and the predictive power of trading volume for equities listed in the Australian Stock Exchange.
Design/methodology/approach
Following the Lee and Swaminathan's approach, portfolios on past returns and past trading volume is constructed. In this approach, all stocks are ranked independently on the basis of past returns and past trading volume. The stocks are then assigned to one of five portfolios based on past returns and one of three portfolios based on trading volume over the same period.
Findings
A strong momentum effect for the Australian market during the period 1988 through 2002 is observed. Further, momentum plays an important role in providing information about stocks. Past trading volume appears to predict both the magnitude and persistence of price momentum.
Research limitations/implications
Substantial momentum observed in monthly stock returns has investment implications. Abnormal returns vary from 0.3 to 7 per cent per month in the intermediate horizon.
Originality/value
This study provides an out of sample evidence by examining the relationship between “trading volume” (measured by the turnover ratio) and “momentum” strategies in an Australian setting.
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Karen J. Jansen and David A. Hofmann
In a series of studies, we develop and validate an approach to studying momentum fluctuations over the course of organizational change to better understand the dynamics of change…
Abstract
In a series of studies, we develop and validate an approach to studying momentum fluctuations over the course of organizational change to better understand the dynamics of change processes. The first study experimentally examines momentum fluctuations in a controlled change context and explores individual predictors of variance in momentum. The second study utilizes a real organizational setting, examining organizationally relevant predictors of momentum variance and the ability of momentum trends to predict meaningful organizational outcomes. Combined results provide evidence that momentum mapping is a valid approach for researchers and managers exploring processes that unfold over time.
Hong-Yi Chen, Chun-Huei Hsu and Sharon S. Yang
This study develops an environment, social, and governance (ESG) momentum strategy by combining information about ESG scores and the momentum effect. This study, subsequently…
Abstract
This study develops an environment, social, and governance (ESG) momentum strategy by combining information about ESG scores and the momentum effect. This study, subsequently, applies the ESG momentum strategy to Taiwanese and Japanese stock markets and investigates the performance of the ESG momentum strategy in each market. Detailed comparisons of the ESG scores and ESG momentum performance between the two markets are conducted. The empirical results show that the ESG momentum strategy can obtain enhanced profits in the Taiwanese market, while the ESG momentum strategy cannot lead to substantial profits in the Japanese market. In addition, the ESG momentum effect in the Taiwanese market can last for three years after portfolio formation. In the Japanese market, the ESG contrarian strategy may deliver better profits than the ESG momentum strategy.
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George Li, Ming Li and Shuming Liu
The paper aims to investigate whether or not a firm’s capital structure can interact with past stock returns to affect future stock returns. Specifically, the authors examine…
Abstract
Purpose
The paper aims to investigate whether or not a firm’s capital structure can interact with past stock returns to affect future stock returns. Specifically, the authors examine whether or not capital structure can help improve momentum profit.
Design/methodology/approach
The authors use the US common stocks data from 1965 to 2022 to empirically examine the impact of capital structure on momentum profit.
Findings
When capital structure is measured either as the ratio of debt to asset or the ratio of liability to asset, we all find out that momentum strategies tend to be more profitable for stocks with large capital structure.
Originality/value
Besides documenting the empirical evidence of the impact of capital structure on momentum profit, the authors also present a simple explanation for their empirical results and show that their finding is consistent with the behavioral finance theory that characterizes investors’ increased psychological bias and the more limited arbitrage opportunity when the estimation of firm value becomes more difficult or less accurate.
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Knut F. Lindaas and Prodosh Simlai
We examine the incremental cross-sectional role of several common risk factors related to size, book-to-market, and momentum in size-and-momentum-sorted portfolios. Unlike the…
Abstract
We examine the incremental cross-sectional role of several common risk factors related to size, book-to-market, and momentum in size-and-momentum-sorted portfolios. Unlike the existing literature, which focuses on the conditional mean specification only, we evaluate the common risk factors’ incremental explanatory power in the cross-sectional characterization of both average return and conditional volatility. We also investigate the role of ex-ante market risk in the cross-section. The empirical results demonstrate that the size-and-momentum-based risk factors explain a significant portion of the cross-sectional average returns and cross-sectional conditional volatility of the benchmark equity portfolios. We find that the Fama–French (1993) factors and the ex-ante market risk are priced in the cross-sectional conditional volatility. We conclude that the size-and-momentum-based factors provide a source of risk that is independent of the Fama–French factors as well as ex-post and ex-ante market risk. Our results bolster the risk-based explanation of the size and momentum effects.
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Bob Li, Mong Shan Ee, Yee Ling Boo and Mamunur Rashid
Ever since the publication of the original Jegadeesh and Titman (1993) study, momentum effect has been tested vigorously to validate its pervasiveness for different time periods…
Abstract
Purpose
Ever since the publication of the original Jegadeesh and Titman (1993) study, momentum effect has been tested vigorously to validate its pervasiveness for different time periods and across different markets. In spite of numerous out-of-sample tests, there is one apparent alibi – little research has been devised for steady increasing of Shari’ah compliant stocks.
Methodology/approach
This study is to examine the momentum strategy returns in a global Shari’ah compliant stock setting.
Findings
It finds strong presence of stock momentum returns for Pakistan and Malaysia. And the momentum returns are neither driven by industry momentum nor by the small size stocks. Though no momentum profits are found for the portfolios formed by global Shari’ah compliant stocks, this seems to be largely due to return reversal for the small size Shari’ah compliant stocks.
Originality/value
The strong presence of momentum profits for relatively large Shari’ah compliant stocks is a desirable trait as it indicates that the momentum trading strategies are practical and implementable.
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As the world's largest emerging market, the evidence of momentum effect in China is also mixed. Meanwhile, prior studies mainly examined individual stock momentum in China, with…
Abstract
Purpose
As the world's largest emerging market, the evidence of momentum effect in China is also mixed. Meanwhile, prior studies mainly examined individual stock momentum in China, with little concern for industry momentum and its relationship with trading volume. The motivation of this study is to investigate industry momentum in China and examine whether trading volume can enhance its profitability.
Design/methodology/approach
Firstly, the authors test the existence of industry momentum in China; secondly, the authors test the correlation between trading volume and momentum returns using the double ranking method; finally, the authors test whether trading volume enhances the momentum returns using Fama–French five-factor model.
Findings
The authors find that there is a significant industry momentum effect in China, and the momentum returns jointly come from winner and loser portfolios. The intervals between the formation and holding periods have an impact on the performance of momentum portfolios. In terms of trading volume, the authors find that high-volume industries have industry momentum effects while low-volume industries do not. The industry momentum strategies achieve higher excess returns in high-volume industries.
Practical implications
Prior literature found higher momentum returns in low-volume stocks in China, but the research in this study suggests that implementing an industry momentum strategy in low-volume industries will miss out on higher returns or even bring losses, and instead the investors should invest in high-volume industries to get the best performance.
Originality/value
This study extends existing research by focusing on industry momentum and its relationship with trading volume in the Chinese stock market and finds an interesting relationship between industry momentum returns and trading volume, which is different from related studies.
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