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Momentum Investing and Business Cycle Risk: Evidence from Pole to Pole
Author(s) -
Griffin John M.,
Ji Xiuqing,
Martin J. Spencer
Publication year - 2003
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1046/j.1540-6261.2003.00614.x
Subject(s) - momentum (technical analysis) , economics , business cycle , financial economics , econometrics , macroeconomics
We examine whether macroeconomic risk can explain momentum profits internationally. Neither an unconditional model based on the Chen, Roll, and Ross (1986) factors nor a conditional forecasting model based on lagged instruments provides any evidence that macroeconomic risk variables can explain momentum. In addition, momentum profits around the world are economically large and statistically reliable in both good and bad economic states. Further, these momentum profits reverse over 1‐ to 5‐year horizons, an action inconsistent with existing risk‐based explanations of momentum.