PurposeThis paper jointly examines how firm size and idiosyncratic risk impact momentum returns.Design/methodology/approachUsing regression analysis, the authors investigate how firm size and idiosyncratic risk impact price momentum. The authors review firm price data in 25 country markets in the Thomson Financial Datastream database from 1979 to 2009.FindingsThis study’s findings suggest price momentum is more significant among stocks with smaller size and higher idiosyncratic risk. The authors find that winner and loser portfolios have significantly smaller size and higher idiosyncratic risk than portfolios in the middle quintiles.Research limitations/implicationsThis study’s results are consistent with the notion that firm size matters in price momentum and mispricing is greatest for small firms because of the greater risk potential to arbitrageurs. In addition, this finding that firms with higher idiosyncratic risk have greater price momentum supports the idea that investors underreact to firm-specific information.Practical implicationsThis work finds evidence that investors underreact to firm-specific information. As such, these findings are of particular interest for investors looking to exploit opportunities for abnormal returns through price momentum trading.Originality/valueThis paper jointly examines the effects of firm size and idiosyncratic risk on momentum returns. This investigation considers these effects in the global markets. This work adds to the research base by illustrating that both winner and loser portfolios have significantly smaller size and higher idiosyncratic risk than portfolios in the middle quintiles. Also unique to this study, the authors capture the time-variation of expected IdioRisk and the asymmetric effects of volatility by using an exponential general autoregressive conditional heteroskedastic (EGARCH) model to calculate conditional idiosyncratic risk.

Large commercial banks have been financially impacted by both: (i) the Dodd-Frank Effect, which is the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and (ii) the Trump Effect, which is the presidential election of Donald Trump in 2016. It is well-known that the Dodd-Frank Act targeted large commercial banks with additional regulatory compliance costs such as the Dodd-Frank Act Stress Test (DFAST), the Durbin Amendment, the Volcker Rule, the Lincoln Amendment, and the creation of the Consumer Financial Protection Bureau. While the goal of the Dodd-Frank Act is to prevent another 2008 financial crisis, it imposes huge regulatory compliance costs on large commercial banks. The American Action Forum reported the compliance cost at more than $36 billion and 73 million paperwork hours. The Government Accountability Office (GAO) originally calculated compliance costs at $2.9 billion for the first five years, but the estimated cost published in the Federal Register was raised to $10.4 billion. Consequently, while seeking and securing the presidency, Donald Trump promised large commercial banks there would be regulatory rollbacks of the Obama-era legislation. In addition to examining the Dodd-Frank Effect and Trump Effect separately, we will examine the Combined Effect. This paper will add valuable knowledge to government policy makers on how the regulation and deregulation impacts commercial banks, and in a more general sense, how regulatory changes (and even perceived changes) impact firm value.