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Momentum Investing and Business Cycle Risk: Evidence from Pole to Pole

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  • John M. Griffin
  • Xiuqing Ji
  • J. Spencer Martin

Abstract

We examine whether macroeconomic risk can explain momentum profits internationally. Neither an unconditional model based on the Chen, Roll, and Ross (1986) factors nor a conditional forecasting model based on lagged instruments provides any evidence that macroeconomic risk variables can explain momentum. In addition, momentum profits around the world are economically large and statistically reliable in both good and bad economic states. Further, these momentum profits reverse over 1‐ to 5‐year horizons, an action inconsistent with existing risk‐based explanations of momentum.

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  • John M. Griffin & Xiuqing Ji & J. Spencer Martin, 2003. "Momentum Investing and Business Cycle Risk: Evidence from Pole to Pole," Journal of Finance, American Finance Association, vol. 58(6), pages 2515-2547, December.
    • Handle: RePEc:bla:jfinan:v:58:y:2003:i:6:p:2515-2547
    DOI: 10.1046/j.1540-6261.2003.00614.x
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