Bad News Travels Slowly: Size, Analyst Coverage, and the Profitability of Momentum Strategies

Hong, Harrison; Lim, Terence; Stein, Jeremy C.

doi:10.1111/0022-1082.00206

Cited by 2,237 publications

(1,338 citation statements)

References 45 publications

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“…For example, Demir et al (2004), Rouwenhorst (1998), Hong et al (2000), Hameed and Kusnadi (2002), Siganos (2007) etc., have documented the positive effect of small-size stocks on profitability of the momentum strategy. On the contrary, other studies have failed to document any evidence to separate contribution of small-size stocks on profitability of the momentum strategy such as the studies by T. Hou and Mcknight (2004), Mengolie (2004) etc.…”

Section: Sizementioning

confidence: 99%

Momentum Returns in Tehran Stock Exchange: The Influences of Size and Liquidity

Mansouri¹,

Tehrani²,

Ansari³

2012

IBR

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A study was carried out during 2001 to 2010 to illustrate the profit of momentum strategy in Tehran stock Exchange, and possibility of higher abnormal return based on past performance trends. In this study, the effects of two substantial variables including size and liquidity on profitability of momentum strategy in Tehran stock Exchange were investigated. The study was conducted in two sub-periods: 2005-2010, and 2007-2010. The first is due to a significant change in the number of stock companies after privatization, and the second is to cover the effects of global financial crisis on Iran's economy. Our sample includes three separate samples of all stock market joined companies before the mentioned related periods that have been traded in at least half of the total trading days in the related period. Results showed that using momentum strategy in Tehran Stock Exchange created negative returns in all periods. Moreover, liquidity factor did not affect the profitability of momentum strategy. Meanwhile, considering size as another fundamental factor, the positive effect of small stocks was identified only in one period, from 2005 to 2010. In other periods, however, it led to negative returns.

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Section: Sizementioning

confidence: 99%

Momentum Returns in Tehran Stock Exchange: The Influences of Size and Liquidity

Mansouri¹,

Tehrani²,

Ansari³

2012

IBR

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“…The momentum factor is the difference in returns between a portfolio of winners and a portfolio of losers. Hong, Lim and Stein (2000), Jegadeesh (1990), Jegadeesh andTitman (1993, 2001), and Nijman et al (2004) examined momentum returns of firm size and value. The findings show that momentum effect is more in small cap stocks in the respective markets studied.…”

Section: Introductionmentioning

confidence: 99%

“…The results indicate that the momentum factor was statistically significant along with the size and value factors. Subsequently, Hong et al (2000), investigated return momentum effect on the basis of size. Nonetheless, they found that portfolio of stocks with the highest market value has non-existent of momentum effect.…”

Section: Introductionmentioning

confidence: 99%

A Comparative Analysis of Four-Factor Model and Three-Factor Model in the Nigerian Stock Market

Evbayiro-Osagie¹,

Osamwonyi²

2017

IJFR

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The study investigates if the three-factor model explains variation in expected returns of stocks on the Nigerian Stock Exchange (NSE); and also ascertains if the four-factor model explains the variation in expected returns of stocks on the NSE better than the three-factor model. The study use a sample size of 139 stocks with continuous trading on the NSE for the period January 2007 to December 2014 to construct 10 portfolios on the bases of size, value and returns. By means of multiple OLS regression analysis method with the aid of StataC13 software the analysis was done. The empirical analysis reveals that the three-factor model explains cross sectional variation in expected returns in the NSE. Also, the study shows that the size effect, value effect as well as momentum effect is present in the market. Comparing the four-factor model with three-factor model, shows that the four-factor model have better explanatory power than the three-factor model in explaining returns in the Market. It is recommended that equity investors, fund/portfolio managers and investment advisers should embed in their operational strategies the explanatory power of market beta, size and value as well as momentum on stock/portfolio returns to enable them build up trading strategies that minimize loss and maximize returns. Market regulators and policy makers should ensure appropriate measures are in place to improve market viability and liquidity in order to enhance the depth and breathe of the market.

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“…Lesmond et al (2001) montrent que les coûts de transaction sont corrélés négativement à la taille des entreprises et au prix des titres et que la rentabilité des stratégies de momentum est reliée positivement aux coûts de transaction. Hong et al (2000) concluent que la rentabilité des stratégies de momentum décroît avec la taille des entreprises et le suivi des analystes financiers, et ce plus spécifiquement pour les portefeuilles perdants. Daniel et Titman (1999) identifient que la rentabilité des stratégies de momentum est plus élevée pour les titres de croissance que pour les titres de valeur.…”

Section: Autres Explications Non Reliées Au Risqueunclassified

Stratégies de momentum sectoriel au Canada

Desrosiers¹,

L’Her²,

Tnani³

2004

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Sur la période de 1962 à 2000, les stratégies de momentum basées sur des indices sectoriels canadiens sont rentables particulièrement pour des horizons de formation et de détention de six mois. Le risque diminue de façon appréciable lorsque quatre secteurs d’activité plutôt qu’un seul sont considérés dans les portefeuilles extrêmes de gagnants et de perdants. Pour les portefeuilles couverts, le rendement anormal est légèrement supérieur au rendement total, de sorte que le risque mesuré par l’exposition aux trois facteurs de Fama et French n’explique pas la rentabilité des stratégies de momentum sectoriel. Ce résultat vaut lorsque le risque associé aux portefeuilles couverts est considéré constant ou lorsqu’il varie dans le temps. La comparaison des rendements des stratégies de momentum basées sur le rendement total, sur la composante spécifique et sur la composante factorielle du rendement, montre que l’essentiel du rendement des stratégies de momentum sectoriel provient de la composante spécifique.Momentum strategies based on TSE 300 sector indices have been profitable over the 1962-2000 period, especially for six-month formation and holding horizons. The risk decreases considerably when four sectors rather than only one are considered in the extreme winner and loser portfolios. For the long-short winner-loser portfolios, the abnormal returns are slightly higher than the total returns. This is consistent with the inability of the Fama and French three risk factors to explain the profitability of momentum strategies. This result holds when the risk associated with the long-short winner-loser portfolios is considered constant or when it varies through time. Comparison of the profitability of momentum strategies based on the total past return, on the specific component and on the factor component of return shows that most of the returns observed for the sector momentum strategies are generated by the specific component of returns

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Bad News Travels Slowly: Size, Analyst Coverage, and the Profitability of Momentum Strategies

Cited by 2,237 publications

References 45 publications

Momentum Returns in Tehran Stock Exchange: The Influences of Size and Liquidity

Momentum Returns in Tehran Stock Exchange: The Influences of Size and Liquidity

A Comparative Analysis of Four-Factor Model and Three-Factor Model in the Nigerian Stock Market

Stratégies de momentum sectoriel au Canada

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