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Sources of momentum profits in international stock markets

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  • Kyung-In Park
  • Dongcheol Kim
  • Henk Berkman

Abstract

type="main" xml:id="acfi12009-abs-0001"> This paper examines the sources of momentum profits of countries exhibiting and not exhibiting momentum and compares the differences in the underlying factors determining momentum profits between these two groups of countries. We find remarkable differences in the decomposed components between these two groups of countries. Countries exhibiting momentum show that the cross-sectional dispersion in unconditional mean returns dominates the negative contribution from the component reflecting the intertemporal behaviour of asset returns. However, this is not the case in countries exhibiting no momentum. Furthermore, countries with greater relative contribution from the cross-sectional variance in unconditional mean returns tend to have greater momentum profits. Our results may support risk-based explanations for the momentum phenomenon rather than behavioural finance-based explanations.

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  • Kyung-In Park & Dongcheol Kim & Henk Berkman, 2014. "Sources of momentum profits in international stock markets," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 54(2), pages 567-589, June.
    • Handle: RePEc:bla:acctfi:v:54:y:2014:i:2:p:567-589
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    File URL: http://hdl.handle.net/10.1111/acfi.2014.54.issue-2
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    Cited by:

    1. Linnenluecke, Martina K. & Chen, Xiaoyan & Ling, Xin & Smith, Tom & Zhu, Yushu, 2016. "Emerging trends in Asia-Pacific finance research: A review of recent influential publications and a research agenda," Pacific-Basin Finance Journal, Elsevier, vol. 36(C), pages 66-76.
    2. Eom, Cheoljun & Park, Jong Won, 2023. "Price behavior of small-cap stocks and momentum: A study using principal component momentum," Research in International Business and Finance, Elsevier, vol. 65(C).
    3. Yin, Libo & Wei, Ya, 2020. "Aggregate profit instability and time variations in momentum returns: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 60(C).
    4. Yang, Yunlin & Gebka, Bartosz & Hudson, Robert, 2019. "Momentum effects in China: A review of the literature and an empirical explanation of prevailing controversies," Research in International Business and Finance, Elsevier, vol. 47(C), pages 78-101.

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