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Size and Momentum Profitability in International Stock Markets

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  • Wagner, Alexander F.
  • Schrimpf, Paul
  • Schmidt, Peter S.
  • von Arx, Urs
  • Ziegler, Andreas

Abstract

We study the link between the profitability of momentum strategies and firm size, drawing on an extensive dataset covering 23 stock markets across the globe. We first present evidence of an ?extreme? size premium in a large number of countries. These size premia, however, are most likely not realizable due to low stock market depth. We also show that international momentum profitability declines sharply with market capitalization. Momentum premiums are also considerably diminished by trading costs, when taking into account the actual portfolio turnover incurred when implementing this strategy. In contrast to strategies based on size, we find that momentum premia especially for medium-sized stocks still remain economically and statistically significant in most equity markets worldwide after adjusting for transaction costs.

Suggested Citation

  • Wagner, Alexander F. & Schrimpf, Paul & Schmidt, Peter S. & von Arx, Urs & Ziegler, Andreas, 2015. "Size and Momentum Profitability in International Stock Markets," CEPR Discussion Papers 10804, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10804
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    Cited by:

    1. Ivan Petzev & Andreas Schrimpf & Alexander F. Wagner, 2015. "Has the Pricing of Stocks Become More Global?," Swiss Finance Institute Research Paper Series 15-48, Swiss Finance Institute, revised Apr 2016.
    2. Galvani, Valentina & Li, Lifang, 2018. "The Momentum Effect for Canadian Corporate Bonds," Working Papers 2018-16, University of Alberta, Department of Economics.
    3. Adam Zaremba & Jacob Koby Shemer, 2018. "Price-Based Investment Strategies," Springer Books, Springer, number 978-3-319-91530-2, April.
    4. Andreas Gruener & Christian Finke, 2018. "Lead-Lag Relationships in International Stock Markets Revisited: Are They Exploitable?," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 9(1), pages 8-30, January.

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    More about this item

    Keywords

    International equity markets; Momentum; Size; Asset pricing anomalies; Transaction costs;
    All these keywords.

    JEL classification:

    • C89 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Other
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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