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Industry classification, industry momentum and short-term reversal

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  • Li, Scott

Abstract

This paper finds that the level of industry classification plays a significant role in the performance of industry momentum strategies. From 1963 to 2018, it appears that using higher levels of classification generates higher positive returns, while using granular level generates results that display short- and mid-term reversal patterns. In addition, the performance of industry momentum strategies across different levels of industry classification varies significantly over different sample periods. This is likely caused by the evolution of market structure over time. This paper highlights the influence industry classifications and market structure evolution have on the performance of industry momentum strategies.

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  • Li, Scott, 2022. "Industry classification, industry momentum and short-term reversal," Finance Research Letters, Elsevier, vol. 48(C).
    • Handle: RePEc:eee:finlet:v:48:y:2022:i:c:s1544612322001490
    DOI: 10.1016/j.frl.2022.102860
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    References listed on IDEAS

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    Cited by:

    1. Joon Chul James Ahn & Dragos Gorduza & Seonho Park, 2024. "Hidden neighbours: extracting industry momentum from stock networks," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 38(4), pages 415-441, December.

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    More about this item

    Keywords

    Industry classification; Industry momentum; Short-term reversal;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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