Residual momentum

David Blitz, Joop Huij and Martin Martens

Journal of Empirical Finance, 2011, vol. 18, issue 3, 506-521

Abstract: Conventional momentum strategies exhibit substantial time-varying exposures to the Fama and French factors. We show that these exposures can be reduced by ranking stocks on residual stock returns instead of total returns. As a consequence, residual momentum earns risk-adjusted profits that are about twice as large as those associated with total return momentum; is more consistent over time; and less concentrated in the extremes of the cross-section of stocks. Our results are inconsistent with the notion that the momentum phenomenon can be attributed to a priced risk factor or market microstructure effects.

Keywords: Momentum; Time-varying; risk; Stock-specific; returns; Residual; returns (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (29)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:18:y:2011:i:3:p:506-521

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