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 | |
| State | Published - Sep 2005 |
| Externally published | Yes |
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Keywords
- Common factors
- Efficiency
- Industry portfolios
- Momentum
ASJC Scopus subject areas
- Finance
Cite this
Industry momentum and common factors. / Du, Ding; Denning, Karen.
In: Finance Research Letters, Vol. 2, No. 3, 09.2005, p. 107-124.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Industry momentum and common factors
AU - Du, Ding
AU - Denning, Karen
PY - 2005/9
Y1 - 2005/9
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
UR - http://www.scopus.com/inward/record.url?scp=23844522243&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=23844522243&partnerID=8YFLogxK
U2 - 10.1016/j.frl.2005.05.001
DO - 10.1016/j.frl.2005.05.001
M3 - Article
AN - SCOPUS:23844522243
VL - 2
SP - 107
EP - 124
JO - Finance Research Letters
JF - Finance Research Letters
SN - 1544-6123
IS - 3
ER -