 Momentum and monthly effect: an anomaly within an anomaly!Nusret Cakici and Sris Chatterjee International Journal of Banking, Accounting and Finance, 2010, vol. 2, issue 2, 176-192 Abstract: This paper evaluates the relation between two well-known anomalies in stock returns, viz, momentum and monthly effect. The monthly effect anomaly refers to the fact that stocks earn positive average returns only during the first half of the month and zero average returns during the second half. In this paper, we show that although the monthly effect anomaly continues to hold for stocks in general (as well as for stocks grouped by size or book-to-market or other criteria), the monthly effect seems to break down for momentum portfolios. This result has implications for implementing a portfolio trading strategy based upon the momentum effect and the monthly effect. We further show that the profitability of momentum portfolios arises from the second half of the month because the monthly effect for winner and loser portfolios is asymmetric. We also examine the risk characteristics of the momentum returns. The risk-adjusted excess return (or alpha) for momentum portfolio was previously reported by other researchers as significant, but is statistically insignificant in recent years. Keywords: momentum effect; monthly effect; anomalies; stock returns; portfolio trading strategy; momentum portfolios; risk. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ids:injbaf:v:2:y:2010:i:2:p:176-192 Access Statistics for this article More articles in International Journal of Banking, Accounting and Finance from Inderscience Enterprises Ltd |
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