Median momentum

Tsung‐Yu Chen and Pin‐Huang Chou

European Financial Management, 2019, vol. 25, issue 4, 1080-1118

Abstract: The median is a better measure of a sample's central tendency in the presence of extreme observations. We propose an alternative momentum strategy formed by buying (shorting) stocks with high (low) average median returns over a formation period of 3–12 months. The median momentum strategy outperforms the traditional price momentum strategy for all holding periods from 1 month to 5 years, with no long‐term reversal. This same return pattern is observed for all G7 countries. Further analysis indicates that median momentum profitability is an underreaction‐only phenomenon and shows behavioral patterns related to short‐sale restrictions and investor sentiment.

Date: 2019
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https://doi.org/10.1111/eufm.12204

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Persistent link: https://EconPapers.repec.org/RePEc:bla:eufman:v:25:y:2019:i:4:p:1080-1118

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