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Another look at sources of momentum profits

Daniel Chai, Mardy Chiah, Angel Zhong and Bob Li

International Review of Economics & Finance, 2022, vol. 79, issue C, 310-323

Abstract: We analyze firm characteristic variables that potentially explain the momentum effect. Using a decomposition procedure developed by Hou and Loh (2016), we find that variables shown to have relations with momentum do not necessarily explain the effect. Among the firm characteristic variables considered, variables related to the direction and trend of trading volume or share prices play an important role in explaining price momentum. The contribution is primarily dominated by aggregated signed trading volume. Our results are robust to subsample analysis and different momentum period definitions. This paper sheds light on the sources of momentum returns.

Keywords: Momentum; Anomalies; Asset pricing; Behavioural biases (search for similar items in EconPapers)
JEL-codes: G13 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.iref.2022.02.054

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