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Trade momentum for alpha

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  • Hong, Weiting

Abstract

I provide new evidence on the value-relevance of international trade development, the heterogeneous distribution of foreign economic benefits among market participants, and the value-add of additional geographic information disclosure by designing the Trade Momentum Index with publicly available citation share, export volume, and trade barrier data. Using a sample of 13,016 firm-year combinations of goods-exporting U.S. firms between 2008 and 2020, I find that a Trade Momentum Index-based, equal-weight hedge portfolio generates a statistically significant annualized alpha of 17.42% at a Sharpe ratio of 0.8255. This result exhibits robustness as the abnormal returns persist under different factor models.

Suggested Citation

  • Hong, Weiting, 2022. "Trade momentum for alpha," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004834
    DOI: 10.1016/j.frl.2022.103300
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Asset pricing; Forecasting returns; International trade; Investment decisions; Market inefficiency; Portfolio choice;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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