Premium
Momentum and Credit Rating
Author(s) -
AVRAMOV DORON,
CHORDIA TARUN,
JOSTOVA GERGANA,
PHILIPOV ALEXANDER
Publication year - 2007
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 - 10.1111/j.1540-6261.2007.01282.x
Subject(s) - volatility (finance) , credit rating , cash flow , momentum (technical analysis) , leverage (statistics) , economics , profitability index , financial economics , econometrics , business , monetary economics , actuarial science , finance , mathematics , statistics
This paper establishes a robust link between momentum and credit rating. Momentum profitability is large and significant among low‐grade firms, but it is nonexistent among high‐grade firms. The momentum payoffs documented in the literature are generated by low‐grade firms that account for less than 4% of the overall market capitalization of rated firms. The momentum payoff differential across credit rating groups is unexplained by firm size, firm age, analyst forecast dispersion, leverage, return volatility, and cash flow volatility.