Momentum is a pervasive phenomenon. Therefore, it is important to understand its cause. However, the empirical evidence regarding the sources of momentum is mixed. Where Lewellen (2002) finds that momentum is mainly explained by cross-serial correlations, Pan, Liano, and Huang (2004) show that it is largely due to serial correlations. In this paper, different from Lewellen (2002) and Pan, Liano, and Huang (2004), we focus on the commonly-studied momentum strategies that skip one month between the formation period and the holding period, and find that momentum is mainly explained by cross-serial correlations. This pattern shows up in different types of portfolios and in different types of momentum. Therefore, it is real not spurious. This finding presents a challenge to the popular behavioral models, because they predict that momentum is caused by serial correlations not cross-serial correlations.
|Original language||English (US)|
|Number of pages||17|
|Journal||International Research Journal of Finance and Economics|
|State||Published - Oct 1 2010|
- Sources of momentum
ASJC Scopus subject areas
- Economics and Econometrics