Industry momentum and common factors

Ding Du; Karen Denning

doi:10.1016/j.frl.2005.05.001

Industry momentum and common factors

Ding Du, Karen Denning

Research output: Contribution to journal › Article › peer-review

18 Scopus citations

Abstract

Jegadeesh and Titman [1993. Journal of Finance 48, 65-91] suggest that if there is a delayed reaction to common information in the stock market, a factor model should include not only contemporaneous but also lagged common factors. We therefore consider a delayed-reaction model that includes both contemporaneous and lagged Fama-French factors. Empirically, we find that common risk based on such a delayed-reaction model can largely explain the momentum in industry portfolio returns. Thus, the present paper rejects the idea that momentum is mainly due to idiosyncratic risk and supports the idea that momentum is due to common risk.

Original language	English (US)
Pages (from-to)	107-124
Number of pages	18
Journal	Finance Research Letters
Volume	2
Issue number	3
DOIs	https://doi.org/10.1016/j.frl.2005.05.001
State	Published - Sep 1 2005
Externally published	Yes

Keywords

Common factors
Efficiency
Industry portfolios
Momentum

ASJC Scopus subject areas

Finance

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title = "Industry momentum and common factors",

abstract = "Jegadeesh and Titman [1993. Journal of Finance 48, 65-91] suggest that if there is a delayed reaction to common information in the stock market, a factor model should include not only contemporaneous but also lagged common factors. We therefore consider a delayed-reaction model that includes both contemporaneous and lagged Fama-French factors. Empirically, we find that common risk based on such a delayed-reaction model can largely explain the momentum in industry portfolio returns. Thus, the present paper rejects the idea that momentum is mainly due to idiosyncratic risk and supports the idea that momentum is due to common risk.",

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author = "Ding Du and Karen Denning",

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AU - Denning, Karen

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N2 - Jegadeesh and Titman [1993. Journal of Finance 48, 65-91] suggest that if there is a delayed reaction to common information in the stock market, a factor model should include not only contemporaneous but also lagged common factors. We therefore consider a delayed-reaction model that includes both contemporaneous and lagged Fama-French factors. Empirically, we find that common risk based on such a delayed-reaction model can largely explain the momentum in industry portfolio returns. Thus, the present paper rejects the idea that momentum is mainly due to idiosyncratic risk and supports the idea that momentum is due to common risk.

AB - Jegadeesh and Titman [1993. Journal of Finance 48, 65-91] suggest that if there is a delayed reaction to common information in the stock market, a factor model should include not only contemporaneous but also lagged common factors. We therefore consider a delayed-reaction model that includes both contemporaneous and lagged Fama-French factors. Empirically, we find that common risk based on such a delayed-reaction model can largely explain the momentum in industry portfolio returns. Thus, the present paper rejects the idea that momentum is mainly due to idiosyncratic risk and supports the idea that momentum is due to common risk.

KW - Common factors

KW - Efficiency

KW - Industry portfolios

KW - Momentum

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JO - Finance Research Letters

JF - Finance Research Letters

SN - 1544-6123

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Industry momentum and common factors

Abstract

Keywords

ASJC Scopus subject areas

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