English, Article edition: Momentum profits, nonnormality risks and the business cycle Ana-Maria Fuertes; Joëlle Miffre; Wooi-Hou Tan

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Physical Description
  • article
Language
  • English

Edition details

Title
  • Momentum profits, nonnormality risks and the business cycle
Author
  • Ana-Maria Fuertes
  • Joëlle Miffre
  • Wooi-Hou Tan
Physical Description
  • article
Notes
  • This article examines the role of nonnormality risks in explaining the momentum puzzle of equity returns. It shows that momentum profits are not normally distributed and, relatedly, that the momentum profitability is partly a compensation for systematic negative skewness risk in line with market efficiency. This finding is pervasive across nine trading strategies that combine different holding and ranking periods and is reinforced when time dependencies in abnormal returns and risks are explicitly modelled. The analysis also reveals that the market and skewness risks of momentum portfolios evolve over the business cycle in a manner that is consistent with market timing and risk aversion. While nonnormality risks matter, a large proportion of the momentum profits remains unexplained which may provide comfort to behavioural theorists.
  • RePEc:taf:apfiec:v:19:y:2009:i:12:p:935-953
Language
  • English
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