Firm-specific versus systematic momentum

Frank Graef, Daniel Hoechle and Markus Schmid

Finance Research Letters, 2025, vol. 76, issue C

Abstract: We decompose stock returns into a systematic and a firm-specific component and show that the dynamics of the firm-specific return component drive the well-known stock momentum anomaly. Our results are robust to the use of a variety of prominent factor models for return decomposition. Furthermore, we find that momentum profits are largely unaffected when the investment universe is restricted to stocks with inconspicuous factor loadings. Our empirical findings call into question the transmission mechanism from factor momentum to stock momentum proposed in recent research.

Keywords: Factor momentum; Firm-specific momentum; Factor timing (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:76:y:2025:i:c:s1544612325002272

DOI: 10.1016/j.frl.2025.106963

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