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Analysis of Business Week hot-growth stocks: Momentum and fundamental investment approaches

Author

Listed:
  • Susana Yu

    (School of Business, Montclair State University)

  • Sang-Hoon Kim

Abstract

This paper extends Bauman et al's (2002) study, and investigates the risk-adjusted returns for the first-timers and repeaters of the Business Week hot-growth stocks. Chan et al's (1996) short-term 6-month momentum model provides significant returns for the first-timers as well as for stocks that had already appeared on the list at least once, the ‘repeaters’. On the other hand, Mohanram's (2005) fundamental model provides significant returns for the repeaters only. A portfolio formed by purchasing the repeaters and short selling the first-timers generates significant returns in 10 out of 12 months after publication. We conclude that profitable long/short portfolios can be implemented on these growth stocks in addition to the short-only strategy as implied in Bauman et al (2002).

Suggested Citation

  • Susana Yu & Sang-Hoon Kim, 2009. "Analysis of Business Week hot-growth stocks: Momentum and fundamental investment approaches," Journal of Asset Management, Palgrave Macmillan, vol. 10(3), pages 192-204, August.
    • Handle: RePEc:pal:assmgt:v:10:y:2009:i:3:d:10.1057_jam.2009.3
    DOI: 10.1057/jam.2009.3
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    References listed on IDEAS

    as
    1. W. Scott Bauman & C. Mitchell Conover & Don R. Cox, 2002. "Are the Best Small Companies the Best Investments?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 25(2), pages 169-186, June.
    2. Chan, Louis K C & Jegadeesh, Narasimhan & Lakonishok, Josef, 1996. "Momentum Strategies," Journal of Finance, American Finance Association, vol. 51(5), pages 1681-1713, December.
    3. Fama, Eugene F & French, Kenneth R, 1992. "The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
    4. John C. Clendenin & Maurice Van Cleave, 1954. "Growth And Common Stock Values," Journal of Finance, American Finance Association, vol. 9(4), pages 365-376, December.
    5. David Durand, 1957. "Growth Stocks And The Petersburg Paradox," Journal of Finance, American Finance Association, vol. 12(3), pages 348-363, September.
    6. 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.
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    Cited by:

    1. Timo H. Leivo, 2012. "Combining value and momentum indicators in varying stock market conditions," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 11(4), pages 400-447, October.
    2. Yu, Susana & Lord, Richard A. & Webb, Gwendolyn, 2010. "The hot-growth companies: How well do analysts predict their performance?," Journal of Economics and Business, Elsevier, vol. 62(3), pages 195-219, May.
    3. Timo H Leivo & Eero J Pätäri, 2011. "Enhancement of value portfolio performance using momentum and the long-short strategy: The Finnish evidence," Journal of Asset Management, Palgrave Macmillan, vol. 11(6), pages 401-416, February.

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