Cash flow news, discount rate news, and momentum

Celiker, Umut; Kayacetin, Nuri Volkan; Kumar, Raman; Sonaer, Gokhan

doi:10.1016/j.jbankfin.2016.07.016

Cited by 11 publications

(5 citation statements)

References 42 publications

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“…The momentum effect can be regarded as a phenomenon proven on the market. From the investors' point of view, it enables the formation of investment strategies for market outperformance (Chordia and Shivakumar, 2012;Celiker et al, 2016;Fan et al, 2018). In the following section, a rolling momentum strategy is created and tested with regard to its performance capability.…”

Section: Scientific Discussion Of the Momentum Strategymentioning

confidence: 99%

“…Overall, regardless of its causes and scientific explanations, the momentum effect can be regarded as a phenomenon proven on the market. From the investors' point of view, the momentum effect enables the formation of corresponding investment strategies for market outperformance (Chordia and Shivakumar, 2012;Celiker et al, 2016;Fan et al, 2018;Schubert et al, 2018). Therefore, in this paper, a rolling momentum strategy is created, which is tested with regard to its performance capabilities, taking into account the above findings.…”

Section: Introductionmentioning

confidence: 99%

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Rolling Momentum Strategy: An Empirical Analysis

et al. 2021

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Research background: The focus of the momentum strategy, as a procyclical investment strategy, lies in the hypothesis that the winning shares of the past will most likely develop in the same direction in the near future. The same is assumed for the performance of the loser shares. The technical trading rules of relative strength according to Levy provide the basis for this approach (Levy, 1967). The momentum strategy can thus offer investors an opportunity to outperform the market. The creation of portfolios under the momentum strategy follows simple rules: On the basis of past prices, equities are selected within a formation period according to return criteria. The stocks with the highest and lowest returns on equities in the formation period are combined into winning and losing portfolios, each with the same number. The final step is the acquisition of the winning portfolio, which is held over the specified investment period, with the loser portfolio being sold short at the same time. The empirical analysis presented in this paper focuses on the success of the momentum strategy for the STOXX Europe 600 market over a formation and investment period of six months. Purpose of the article: The objective of this paper is to empirically test the above statements and assumptions. Portfolios are built up on a rolling basis over a period of six months and then observed with respect to their performance over a period from 1995 to 2000. The achieved returns are compared with a buy-and-hold strategy and empirically tested for return differences. Especially the years 2001, 2008, and 2020 as the crisis years of the dot-com bubble, the financial crisis, and the COVID-19 pandemic are focused on and discussed. Methods: The data of the period are examined for performance development in a database in the form of winner and loser portfolios. The returns are calculated as AR to a reference portfolio DAX. The returns are statistically tested for significant differences to a zero return using a t test. Findings & Value added: The results show the performance of the momentum strategy in the period from 1995 to 2000 for the stocks of the STOXX Europe 600. The strong fluctuations in the crisis years are notable. With few exceptions, the reference returns could only provide statistically non-significant results.

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Section: Scientific Discussion Of the Momentum Strategymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Rolling Momentum Strategy: An Empirical Analysis

et al. 2021

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“…Vuolteenaho (2002) finds that firm‐level stock returns are primarily driven by a positive relation with cash flow news, proxied by return on equity. Celiker et al (2016) similarly find that cash flow news is positively associated with price momentum. Cohen et al (2003) find that the dispersion of the “value spread” in the book‐to‐market ratio is largely driven by expected 15‐year profitability.…”

Section: Prior Researchmentioning

confidence: 94%

Cash flow growth and stock returns

Jansen

2021

J of Financial Research

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I extend the financial economic literature by presenting and testing a model that expresses a firm's expected stock return as a function of its expected free cash flow growth. Results suggest that cash flow growth is positively associated with stock returns. Furthermore, additional information is reflected through cash flow growth relative to cash flow, profits, and dividends. Evidence additionally suggests that operating activities explain more than investment activities of the firm. I find that $1 invested in the long–short cash flow growth portfolio grows to $15.30 over the sample period, whereas $1 invested in the stock market grows to $9.85.

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“…In addition, PF FF z,t denotes the size and value pricing factors obtained from Fama and French [37]. Following Celiker et al [62], Chen and Zhao [63], and Garlappi and Yan [64], we utilize the regression intercepts of these models as riskadjusted momentum profits. Appendix B shows the construction procedures of these pricing factors.…”

Section: Asset Pricing Modelsmentioning

confidence: 99%

“…ese two classifications trigger Q 2 portfolios. e studies of Chang et al [72], Kim and Suh [59], and Celiker et al [62] implement the same portfolio.…”

Section: A Details Of the Conditional Momentum Portfoliomentioning

confidence: 99%

An Anecdote of Investor Anxiety and Momentum in China

Lin

Huang³

et al. 2020

Complexity

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We show the effect of investor anxiety on momentum in the Chinese stock market. In this market dominated by retail investors, we examine the momentum profits in 900 types of daily testing periods. We find prevalent price reversals in the long formation and holding periods in the Chinese A-share market. Compared to Goyal and Wahal (2015), Wang and Xie (2010), and Kang et al. (2002) who found no momentum, our novel finding from a daily basis is that the A-share market presents price momentum within the short formation and holding periods. We first test the momentum profits under different strengths of anxiety in the A-share market. The stocks held by the least anxious investors elicit the strongest price momentum, whereas the stocks held by the most anxious investors encounter much weaker price momentum in the A-share market. According to our empirical outcomes, the A-share market overall exhibits higher anxiety and weaker momentum, whereas the B-share market embodies milder anxiety and stronger momentum. From the results of single market and cross-market comparisons, the intrinsic anxiety of retail investors is an essential factor stimulating the Chinese stock market to be prone to price reversals.

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Cash flow news, discount rate news, and momentum

Cited by 11 publications

References 42 publications

Rolling Momentum Strategy: An Empirical Analysis

Rolling Momentum Strategy: An Empirical Analysis

Cash flow growth and stock returns

An Anecdote of Investor Anxiety and Momentum in China

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