The role of shorting, firm size, and time on market anomalies

Israel, Ronen; Moskowitz, Tobias J.

doi:10.1016/j.jfineco.2012.11.005

Cited by 168 publications

(68 citation statements)

References 40 publications

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“…However, Israel and Moskowitz (2013) show that these earlier results do not hold up out-of-sample and report that over a long time period, the long and short sides equally contribute to momentum profits. While the long side of our momentum strategy only contributes a small proportion towards the momentum profits in Panel B, an investor is generally still better off shorting 'loser' portfolios and investing the funds in 'winner' portfolios, as opposed to the value-weighted market portfolio, when an investment period of <12 months is employed.…”

Section: Style Momentum Profitabilitycontrasting

confidence: 55%

Momentum in Australian style portfolios: risk or inefficiency?

Chan

Docherty

2015

Accounting & Finance

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Momentum strategies have been reported to be successful across a range of different markets and asset classes. Three possible explanations for momentum have been hypothesised: risk, return continuation and excessive co-movement of stock returns compared with dividends. Lewellen (2002) adds to this literature by providing evidence of strong momentum returns in style portfolios that can be explained by negative cross-serial correlation, a result which supports the excess co-movement hypothesis. We report robust evidence of style momentum in the Australian market and use the Jegadeesh and Titman (1995) return decomposition to show that this momentum strategy is predominately explained by positive autocorrelation. Our results support the return continuation hypothesis and confirm Chen and Hong's (2002) assertion that Lewellen's (2002) explanation of style momentum returns does not stand up out-of-sample.

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Section: Style Momentum Profitabilitycontrasting

confidence: 55%

Momentum in Australian style portfolios: risk or inefficiency?

Chan

Docherty

2015

Accounting & Finance

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“…For instance, with regard to momentum and value, Hanson and Sunderan (2014) arrive at the following conclusion: "We provide evidence that this increase in capital has resulted in lower strategy returns" (p. 29, see also Schwert (2003)). In contrast, Israel and Moskowitz (2013) conclude that there is "little evidence that size, value, and momentum returns are significantly affected by changes in trading costs or institutional and hedge fund ownership over time" (p. 275). Similarly, Chordia et al (2013) show that abnormal returns for twelve anomalies are much lower in their second subperiod, whereas Haugen and Baker (1996) do not find a pronounced trend.…”

Section: Introductionmentioning

confidence: 99%

What explains the dynamics of 100 anomalies?

Jacobs

2015

Journal of Banking & Finance

158

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“…Instead, they find that momentum-strategy profitability in 1990 to 1998 is similar to that in the earlier period. Results from additional studies also attest to the robustness and persistence of momentum-strategy profitability (e.g., Figelman [2007]; Israel and Moskowitz [2013]). Fama and French [1996] find that the momentum strategy is profitable, as measured by both raw returns and abnormal returns generated using the Fama and French [1993] three-factor model.…”

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confidence: 75%

Did the Profitability of Momentum and Reversal Strategies Decline with Arbitrage Costs After the Turn of the Millennium?

Lee

Ogden

2015

JPM

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is a professor of finance in the School of Management at SUNY-Buffalo in Buffalo, NY. joeogden@buffalo.edu A rbitrageurs identify and trade on mispriced securities, and their trades contribute to the efficiency of security prices (Samuelson [1965], Fama [1970], Kyle [1985]). Arbitrage is costly, however, and these costs drive a wedge between actual market prices and efficient prices; i.e., pricing anomalies can exist even if all market participants are rational, though their size should be bounded by arbitrage costs (Fama [1991], Shleifer and Vishny [1997]).This article investigates the effect of arbitrage costs on the profitability of three well-known arbitrage strategies: momentum, long-term reversal, and short-term reversal. All three strategies involve the development of hedge portfolios based on past returns. The momentum strategy involves long and short positions, respectively, in stocks with the highest and lowest intermediate-term (three to twelve months) past returns; the long-term reversal strategy involves long and short positions, respectively, in stocks with lowest and highest long-term (three to five years) past returns; and the short-term reversal strategy involves long and short positions, respectively, in stocks with the lowest and highest one-month past returns.Jegadeesh and Titman [1993] were first to document evidence of the profitability of the momentum strategy, using data on NYSE

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The role of shorting, firm size, and time on market anomalies

Cited by 168 publications

References 40 publications

Momentum in Australian style portfolios: risk or inefficiency?

Momentum in Australian style portfolios: risk or inefficiency?

What explains the dynamics of 100 anomalies?

Did the Profitability of Momentum and Reversal Strategies Decline with Arbitrage Costs After the Turn of the Millennium?

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