Global International ELM versus Momentum

Robert Snigaroff and David Wroblewski

Chapter 96 in Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives:In 4 Volumes, 2024, pp 3203-3223 from World Scientific Publishing Co. Pte. Ltd.

Abstract: We construct liquidity and earnings-based factors and combine with the Market to describe stock returns. Liquidity and Liquidity Growth are significant factors across markets. Intercept tests show that the IELM (International Earnings, Liquidity, and Market) model fits the cross section in various country groupings. As previous research showed, a Liquidity Growth factor subsumes momentum in the U.S., and we test this across international markets. From 2001 through 2019, the momentum factor has a high mean and is significant in Europe and in the Asia-Pacific, except Japan. For this time period, however, momentum is not significant in North American and Japan. While the IELM model reduces the momentum intercept in North America, both IELM and Fama and French (2017) have trouble explaining momentum in Europe and Asia where momentum is pervasive.

Keywords: Financial Accounting; Financial Auditing; Mutual Funds; Hedge Funds; Asset Pricing; Options; Portfolio Analysis; Risk Management; Investment Analysis; Momentum Analysis; Behavior Analysis; Futures; Index Futures; CDCs; Financial Econometrics; Statistics; Financial Derivatives; Financial Accounting (search for similar items in EconPapers)
JEL-codes: G1 G11 G12 G3 M41 M42 (search for similar items in EconPapers)
Date: 2024
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