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Separating momentum from reversal in international stock markets

Author

Listed:
  • Christian Walkshäusl

    (University of Regensburg)

  • Florian Weißofner

    (University of Regensburg)

  • Ulrich Wessels

    (University of Regensburg)

Abstract

Taking into account expected return characteristics like firm size and book-to-market in the selection of winners and losers helps to ex ante separate stocks with momentum from those that exhibit reversal in international equity markets. A strategy that buys small value winners and sells large growth losers generates significantly larger momentum profits than a standard momentum strategy, is robust to common return controls, and does not suffer from return reversals for holding periods up to 3 years. The superior performance of the strategy is attributable to a rather systematic exploitation of cross-sectional mispricing among momentum stocks.

Suggested Citation

  • Christian Walkshäusl & Florian Weißofner & Ulrich Wessels, 2019. "Separating momentum from reversal in international stock markets," Journal of Asset Management, Palgrave Macmillan, vol. 20(2), pages 111-123, March.
    • Handle: RePEc:pal:assmgt:v:20:y:2019:i:2:d:10.1057_s41260-019-00109-5
    DOI: 10.1057/s41260-019-00109-5
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    Cited by:

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    2. Zaremba, Adam & Long, Huaigang & Karathanasopoulos, Andreas, 2019. "Short-term momentum (almost) everywhere," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 63(C).
    3. Syed Riaz Mahmood Ali, 2022. "Do momentum and reversal matter in the Singapore stock market?," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 29(6), pages 1692-1708, November.

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