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Risk factor and industry effects in the cross-country comovement of momentum returns

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  • Naranjo, Andy
  • Porter, Burt

Abstract

This paper examines the sources of cross-country comovement of momentum returns over the 1975-2004 period. Using data on more than 17,000 individual firms across 100 industries from 40 countries, we document the profitability of country-neutral individual firm, industry, and industry-adjusted return momentum. We show that country-neutral momentum returns are significantly correlated across countries, the correlation is time-varying, and that comovement among industries cannot explain the comovement of country-neutral momentum returns. However, we find that standard risk factor models do explain a significant portion of the cross-country comovement of momentum returns, even though they do not explain average momentum returns.

Suggested Citation

  • Naranjo, Andy & Porter, Burt, 2010. "Risk factor and industry effects in the cross-country comovement of momentum returns," Journal of International Money and Finance, Elsevier, vol. 29(2), pages 275-299, March.
    • Handle: RePEc:eee:jimfin:v:29:y:2010:i:2:p:275-299
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    1. Bruce J. Vanstone & Tom Smith & Tobias Hahn, 2017. "Australian momentum: performance, capacity and the GFC effect," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(1), pages 261-287, March.
    2. Lukas Macijauskas & Dimitrios I. Maditinos, 2014. "Looking for Synergy with Momentum in Main Asset Classes," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 3-16.
    3. Wang, Xi & Yang, Jiao-Hui & Wang, Kai-Li & Fawson, Christopher, 2017. "Dynamic information spillovers in intraregionally-focused spot and forward currency markets," Journal of International Money and Finance, Elsevier, vol. 71(C), pages 78-110.
    4. De Moor, Lieven & Sercu, Piet, 2013. "The smallest firm effect: An international study," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 129-155.
    5. Lee, Chien-Chiang & Chang, Chi-Hung & Chen, Mei-Ping, 2015. "Industry co-movements of American depository receipts: Evidences from the copula approaches," Economic Modelling, Elsevier, vol. 46(C), pages 301-314.
    6. Bruce Vanstone & Tobias Hahn & Dean Earea, 2021. "Industry momentum: an exchange‐traded funds approach," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(3), pages 4007-4024, September.
    7. Gyamfi-Yeboah, Frank & Ling, David C. & Naranjo, Andy, 2012. "Information, uncertainty, and behavioral effects: Evidence from abnormal returns around real estate investment trust earnings announcements," Journal of International Money and Finance, Elsevier, vol. 31(7), pages 1930-1952.

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