Momentum and reversals: Are they really separate phenomena?

Tsung-Yu Chen, Pin-Huang Chou and Nien-Tzu Yang

Finance Research Letters, 2020, vol. 32, issue C

Abstract: The literature has long debated the co-existence of intermediate-term momentum and long-term return reversals. Recent studies propose several theories to isolate momentum from reversals. This paper provides comprehensive analyses to examine whether intermediate-term momentum and long-term return reversals are really separate phenomena. We show that although these theories all capture a significant fraction of stock returns, the standard Jegadeesh–Titman momentum strategy still generates significant profits in the intermediate term, which are followed by long-term reversals after controlling for these alternative effects. Thus, the co-existence of intermediate-term momentum and long-term reversals remains a distinct phenomenon that is independent of recent theories.

JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:32:y:2020:i:c:s154461231830775x

DOI: 10.1016/j.frl.2019.02.002

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