IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v69y2024ipbs1544612324012455.html
   My bibliography  Save this article

Momentum on historical high

Author

Listed:
  • Tomtosov, Aleksandr

Abstract

This paper decomposes the long side of momentum portfolio holdings by comparing the location of recent prices to historically high prices. Stocks with prices near historical highs represent 45 percent of holdings in momentum and 70 percent of returns. Momentum portfolios formed in the stock universe with stocks closed to historical highs provide 6.2% alpha in comparison with 1.3% for momentum formed from stocks out of historical highs. The historical high momentum portfolio performance is sustainable to control for the lagged momentum of Novy-Marx (2012) and the 52-week high ratio of George and Hwang (2004).

Suggested Citation

  • Tomtosov, Aleksandr, 2024. "Momentum on historical high," Finance Research Letters, Elsevier, vol. 69(PB).
  • Handle: RePEc:eee:finlet:v:69:y:2024:i:pb:s1544612324012455
    DOI: 10.1016/j.frl.2024.106216
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612324012455
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.frl.2024.106216?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jiaqi Guo & Peng Li & Youwei Li, 2022. "What Can Explain Momentum? Evidence from Decomposition," Management Science, INFORMS, vol. 68(8), pages 6184-6218, August.
    2. Sina Ehsani & Juhani T. Linnainmaa, 2022. "Factor Momentum and the Momentum Factor," Journal of Finance, American Finance Association, vol. 77(3), pages 1877-1919, June.
    3. Christian L. Goulding & Campbell R. Harvey & Michele G. Mazzoleni, 2024. "Breaking Bad Trends," Financial Analysts Journal, Taylor & Francis Journals, vol. 80(1), pages 84-98, January.
    4. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    5. Simon Gervais & Ron Kaniel & Dan H. Mingelgrin, 2001. "The High‐Volume Return Premium," Journal of Finance, American Finance Association, vol. 56(3), pages 877-919, June.
    6. repec:bla:jfinan:v:59:y:2004:i:3:p:1345-1365 is not listed on IDEAS
    7. Mayshar, Joram, 1983. "On Divergence of Opinion and Imperfections in Capital Markets," American Economic Review, American Economic Association, vol. 73(1), pages 114-128, March.
    8. Fama, Eugene F. & French, Kenneth R., 2007. "Disagreement, tastes, and asset prices," Journal of Financial Economics, Elsevier, vol. 83(3), pages 667-689, March.
    9. Miller, Edward M, 1977. "Risk, Uncertainty, and Divergence of Opinion," Journal of Finance, American Finance Association, vol. 32(4), pages 1151-1168, September.
    10. R. David Mclean & Jeffrey Pontiff, 2016. "Does Academic Research Destroy Stock Return Predictability?," Journal of Finance, American Finance Association, vol. 71(1), pages 5-32, February.
    11. repec:bla:jfinan:v:59:y:2004:i:5:p:2145-2176 is not listed on IDEAS
    12. Robert Novy-Marx & Mihail Velikov, 2016. "A Taxonomy of Anomalies and Their Trading Costs," The Review of Financial Studies, Society for Financial Studies, vol. 29(1), pages 104-147.
    13. Kewei Hou & Chen Xue & Lu Zhang, 2020. "Replicating Anomalies," The Review of Financial Studies, Society for Financial Studies, vol. 33(5), pages 2019-2133.
    14. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    15. Clifford S. Asness & Tobias J. Moskowitz & Lasse Heje Pedersen, 2013. "Value and Momentum Everywhere," Journal of Finance, American Finance Association, vol. 68(3), pages 929-985, June.
    16. Minyou Fan & Youwei Li & Ming Liao & Jiadong Liu, 2022. "A reexamination of factor momentum: How strong is it?," The Financial Review, Eastern Finance Association, vol. 57(3), pages 585-615, August.
    17. Feifei Li & Tzee-Man Chow & Alex Pickard & Yadwinder Garg, 2019. "Transaction Costs of Factor-Investing Strategies," Financial Analysts Journal, Taylor & Francis Journals, vol. 75(2), pages 62-78, April.
    18. Novy-Marx, Robert, 2012. "Is momentum really momentum?," Journal of Financial Economics, Elsevier, vol. 103(3), pages 429-453.
    19. Jegadeesh, Narasimhan & Titman, Sheridan, 1993. "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance, American Finance Association, vol. 48(1), pages 65-91, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Adam Zaremba & Jacob Koby Shemer, 2018. "Price-Based Investment Strategies," Springer Books, Springer, number 978-3-319-91530-2, March.
    2. Cakici, Nusret & Fieberg, Christian & Metko, Daniel & Zaremba, Adam, 2023. "Machine learning goes global: Cross-sectional return predictability in international stock markets," Journal of Economic Dynamics and Control, Elsevier, vol. 155(C).
    3. Shi, Huai-Long & Zhou, Wei-Xing, 2022. "Factor volatility spillover and its implications on factor premia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    4. Pätäri, Eero & Karell, Ville & Luukka, Pasi & Yeomans, Julian S, 2018. "Comparison of the multicriteria decision-making methods for equity portfolio selection: The U.S. evidence," European Journal of Operational Research, Elsevier, vol. 265(2), pages 655-672.
    5. Ouyang, Ruolan & Zhang, Kun & Zhang, Xuan & Zhu, Dongming, 2024. "Can factor momentum beat momentum factor? Evidence from China," Finance Research Letters, Elsevier, vol. 62(PA).
    6. Chiah, Mardy & Long, Huaigang & Zaremba, Adam & Umar, Zaghum, 2023. "Trade competitiveness and the aggregate returns in global stock markets," Journal of Economic Dynamics and Control, Elsevier, vol. 148(C).
    7. Kim, Junyong, 2024. "Zoom in on momentum," International Review of Financial Analysis, Elsevier, vol. 94(C).
    8. Cakici, Nusret & Zaremba, Adam & Bianchi, Robert J. & Pham, Nga, 2021. "False discoveries in the anomaly research: New insights from the Stock Exchange of Melbourne (1927–1987)," Pacific-Basin Finance Journal, Elsevier, vol. 70(C).
    9. Söhnke M. Bartram & Harald Lohre & Peter F. Pope & Ananthalakshmi Ranganathan, 2021. "Navigating the factor zoo around the world: an institutional investor perspective," Journal of Business Economics, Springer, vol. 91(5), pages 655-703, July.
    10. Büsing, Pascal & Mohrschladt, Hannes & Siedhoff, Susanne, 2024. "Decomposing momentum: The forgotten component," Journal of Banking & Finance, Elsevier, vol. 168(C).
    11. Assoe, Kodjovi & Attig, Najah & Sy, Oumar, 2024. "The battle of factors," Global Finance Journal, Elsevier, vol. 62(C).
    12. Sun, Kaisi & Wang, Hui & Zhu, Yifeng, 2023. "Salience theory in price and trading volume: Evidence from China," Journal of Empirical Finance, Elsevier, vol. 70(C), pages 38-61.
    13. Stephen A. Gorman & Frank J. Fabozzi, 2021. "The ABC’s of the alternative risk premium: academic roots," Journal of Asset Management, Palgrave Macmillan, vol. 22(6), pages 405-436, October.
    14. Zaremba, Adam & Cakici, Nusret & Bianchi, Robert J. & Long, Huaigang, 2023. "Interest rate changes and the cross-section of global equity returns," Journal of Economic Dynamics and Control, Elsevier, vol. 147(C).
    15. Onishchenko, Olena & Zhao, Jing & Kongahawatte, Sampath & Kuruppuarachchi, Duminda, 2024. "Investor heterogeneity and anchoring-induced momentum," Journal of Behavioral and Experimental Finance, Elsevier, vol. 42(C).
    16. Cakici, Nusret & Zaremba, Adam, 2022. "Salience theory and the cross-section of stock returns: International and further evidence," Journal of Financial Economics, Elsevier, vol. 146(2), pages 689-725.
    17. Tobias Wiest, 2023. "Momentum: what do we know 30 years after Jegadeesh and Titman’s seminal paper?," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 37(1), pages 95-114, March.
    18. Lee, Tae Kyun & Sohn, So Young, 2023. "Alpha-factor integrated risk parity portfolio strategy in global equity fund of funds," International Review of Financial Analysis, Elsevier, vol. 88(C).
    19. Clarke, Charles, 2022. "The level, slope, and curve factor model for stocks," Journal of Financial Economics, Elsevier, vol. 143(1), pages 159-187.
    20. Doron Avramov & Si Cheng & Lior Metzker, 2023. "Machine Learning vs. Economic Restrictions: Evidence from Stock Return Predictability," Management Science, INFORMS, vol. 69(5), pages 2587-2619, May.

    More about this item

    Keywords

    Momentum; Factor investing; Portfolio holdings; Price location;
    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:69:y:2024:i:pb:s1544612324012455. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.