In this paper we examine a momentum strategy based on residual stock returns. We find that residual momentum exhibits risk-adjusted profits that are about twice as large as those associated with total return momentum. Moreover, we find that the main arguments that have been put forward in the...

Optimal investment of firms implies that expected stock returns are tied with the expected marginal benefit of investment divided by the marginal cost of investment. Winners have higher expected growth and expected marginal productivity (two major components of the marginal benefit of...

We offer an investment-based interpretation of price and earnings momentum. The neoclassical theory of investment implies that expected stock returns are tied with the expected marginal benefit of investment divided by the marginal cost of investment. Winners have higher expected growth and...

There is substantial evidence that indicates that stocks that perform the best (worst) over a three to 12 month period tend to continue to perform well (poorly) over the subsequent three to 12 months. Up until recently, trading strategies that exploit this phenomenon were consistently profitable...

High momentum returns cannot be explained by risk factors, but they are negatively skewed and subject to occasional severe crashes. I explore the timing of momentum crashes and show that momentum strategies tend to crash in 1-3 months after the local stock market plunge. Next, I propose a simple...

This paper examines to what extent the momentum spread ratio (MSR) can predict momentum profits. The momentum spread ratio as a potential proxy of investor underreaction can significantly predict the momentum, industry momentum, and residual momentum, especially after 1994, suggesting that...

The authors explore the risk-return properties of simple momentum strategies in six major government-bond markets and find that trend-following investment rules generate positive information ratios in the 1987-2011 sample period. They simulate the combination of momentum portfolios with...

We construct a momentum factor that identifies cross-sectional winners and losers based on a weighting scheme that incorporates all the price data, over the entire lookback period, as opposed to only the first and last price points of the window. The weighting scheme is derived from the...

Yes, but only at short lags. In this paper we investigate the relationship between factor momentum and stock momentum. Using a sample of 72 factors documented in the literature, we first replicate earlier findings that factor momentum exists and works both directionally and cross-sectionally. We...

We show that stock prices underreact when there is a political event, reflected in higher momentum returns. We conjecture that political news crowds out stock news cause investors to distract, trade more indexes and underreact to firm specific news. We analyze momentum returns following general...