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Asymmetric effect of style comovement on momentum

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  • Hsu, Ching-Chi
  • Chen, Miao-Ling

Abstract

This study examines whether the impact of style investing on momentum profits depends on market states. By measuring the style comovement to evaluate the influence of style investing on momentum, our evidence shows that the momentum profits on high style comovement portfolios are higher than on low style comovement portfolios. The momentum strategies on high style comovement portfolios are more profitable when the market is optimistic. Our findings demonstrate that style chasing behavior by investors is reinforced following increased market optimism, thus generating an asymmetric influence of style investing in momentum profits.

Suggested Citation

  • Hsu, Ching-Chi & Chen, Miao-Ling, 2019. "Asymmetric effect of style comovement on momentum," Finance Research Letters, Elsevier, vol. 31(C), pages 146-154.
    • Handle: RePEc:eee:finlet:v:31:y:2019:i:c:p:146-154
    DOI: 10.1016/j.frl.2019.03.022
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    1. Nguyen, Anh Duy, 2020. "Alternative reversal variable," Finance Research Letters, Elsevier, vol. 33(C).
    2. Anh Duy Nguyen, 2020. "Alternative reversal variable," Post-Print hal-02388743, HAL.
    3. Anh Duy Nguyen, 2019. "Alternative reversal variable," Working Papers hal-02388743, HAL.

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    More about this item

    Keywords

    Style investing; Market states; Style comovement; Momentum; Style chasing;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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