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Macroeconomic risk and seasonality in momentum profits

Xiuqing Ji, J. Spencer Martin and Yaqiong Yao

Journal of Financial Markets, 2017, vol. 36, issue C, 76-90

Abstract: We contribute to the growing debate on the relation between macroeconomic risk and stock price momentum. Not only is momentum seasonal, so is its net factor exposure. We show that winners and losers only differ in macroeconomic factor loadings in January, the one month when losers overwhelmingly outperform winners. In the remainder of the year, when momentum does exist, winner and loser factor loadings offset nearly completely. Furthermore, the magnitude of macroeconomic risk premia appears to seasonally vary contra momentum. In contrast, the relatively new profitability factor does a much better job of capturing the described seasonality.

Keywords: Momentum; Macroeconomic risk; ROE; Seasonality; January effects (search for similar items in EconPapers)
JEL-codes: G12 E44 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:finmar:v:36:y:2017:i:c:p:76-90