Momentum profits: Fundamentals or time varying unsystematic risk

Abstract

This paper examines how fundamentals and time varying unsystematic risk can explore the origins of momentum strategies. Our data encompasses the monthly returns of listed stocks on the NASDAQ 100 index from 2002 to 2016. The results indicate that winners and losers are slanted towards small‐capitalization stocks with high systematic risk. Whereas only winners have growth and value the characteristics. Additionally, the results from the E‐GARCH‐M indicate that the speed of adjustment to volatility shocks is not the same for winners and losers. In fact, we find that the loser portfolios take a longer time to absorb the shocks and are more sensitive to bad than good Innovations. Finally, the results postulate that Momentum is significantly associated to time varying unsystematic risk, specifically for the (3/3) Strategy.

What drives the distress risk–return puzzle? A perspective on limits of arbitrage

“…Our paper contributes to the literature by providing a new explanation of the distress puzzle as documented by Campbell et al (2008) and dissecting anomalies (Barahona et al, 2021;BenMabrouk & Souayeh, 2021;Jiang et al, 2021). Da and Gao (2010) found that illiquidity was positively associated with high distress risk.…”