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Momentum and Earnings Information in the Korean Stock Market
Author(s) -
Ha Yu Sung,
Kang Jangkoo,
Kim Sun Yung
Publication year - 2021
Publication title -
asia‐pacific journal of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.375
H-Index - 15
eISSN - 2041-6156
pISSN - 2041-9945
DOI - 10.1111/ajfs.12342
Subject(s) - earnings surprise , economics , earnings , financial economics , momentum (technical analysis) , post earnings announcement drift , portfolio , capital asset pricing model , stock (firearms) , earnings response coefficient , econometrics , monetary economics , finance , mechanical engineering , engineering
This study examines whether price momentum profit is related to earnings information in the Korean stock market. Through time‐series and cross‐sectional asset pricing tests, we find that price momentum profits are captured by return on equity; an earnings surprise or revenue surprise partially explains price momentum. The risk‐based factor models cannot explain the existence of earnings‐based momentum, because an earnings‐based zero‐investment portfolio is significantly negatively related to future macroeconomic variables such as gross domestic product and real consumption growth. On the other hand, the underreaction hypothesis is also not sufficient to explain why earnings‐based momentum seems to capture price momentum.