1996
DOI: 10.1111/j.1540-6261.1996.tb05222.x
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Momentum Strategies

Abstract: We examine whether the predictability of future returns from past returns is due to the market's underreaction to information, in particular to past earnings news. Past return and past earnings surprise each predict large drifts in future returns after controlling for the other. Market risk, size, and book–to–market effects do not explain the drifts. There is little evidence of subsequent reversals in the returns of stocks with high price and earnings momentum. Security analysts' earnings forecasts also respon… Show more

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Cited by 1,363 publications
(621 citation statements)
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References 44 publications
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“…The cross-sectional predictive authority of surprises in earnings for expected returns is widely documented in earlier research (see Latane & Jones, Bernard & Thomas, 1989;Chan et al, 1996). It might be helpful to compare firms with high or low surprises in earnings.…”
Section: The Magnitude Of Earnings Qualitymentioning
confidence: 99%
See 3 more Smart Citations
“…The cross-sectional predictive authority of surprises in earnings for expected returns is widely documented in earlier research (see Latane & Jones, Bernard & Thomas, 1989;Chan et al, 1996). It might be helpful to compare firms with high or low surprises in earnings.…”
Section: The Magnitude Of Earnings Qualitymentioning
confidence: 99%
“…As was discussed earlier, changes in current assets and liabilities may be employed by security market analysts as an indicator of prospects for a business. Chan et al (1996) provide evidence that the information content provided by accruals components may even delay the market's response to information contained within a reported earnings number.…”
Section: Predictive Power Of Accruals Componentsmentioning
confidence: 99%
See 2 more Smart Citations
“…Besides the unconditional momentum behavior, the stock returns tend to respond sluggishly to public events and drift in the same direction as the initial event impact, see Chan et al (1996), among others. Those observable public events include earnings announcements, IPO, etc.…”
mentioning
confidence: 99%