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Momentum profits: Fundamentals or time varying unsystematic risk
Author(s) -
BenMabrouk Houda,
Souayeh Ismahen
Publication year - 2021
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1819
Subject(s) - economics , systematic risk , volatility (finance) , capitalization , momentum (technical analysis) , autoregressive conditional heteroskedasticity , econometrics , financial economics , monetary economics , linguistics , philosophy
This paper examines how fundamentals and time varying unsystematic risk can explore the origins of momentum strategies. Our data encompasses the monthly returns of listed stocks on the NASDAQ 100 index from 2002 to 2016. The results indicate that winners and losers are slanted towards small‐capitalization stocks with high systematic risk. Whereas only winners have growth and value the characteristics. Additionally, the results from the E‐GARCH‐M indicate that the speed of adjustment to volatility shocks is not the same for winners and losers. In fact, we find that the loser portfolios take a longer time to absorb the shocks and are more sensitive to bad than good Innovations. Finally, the results postulate that Momentum is significantly associated to time varying unsystematic risk, specifically for the (3/3) Strategy.