On the Earnings and Price Momentum Strategies: Evidence from European Real Estate Firms

Jochem J. Bron (), Chinmoy Ghosh () and Milena Petrova ()
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Jochem J. Bron: Marlborough Partners
Chinmoy Ghosh: University of Connecticut
Milena Petrova: Syracuse University

The Journal of Real Estate Finance and Economics, 2018, vol. 57, issue 3, No 4, 400-430

Abstract: Abstract We test the performance and interaction between earnings and price momentum for European real estate companies by first making use of decile portfolios sorted on the previous 3- to 12-month returns, standardized unexpected earnings and a combination of both. Then, the relation is tested on a risk-adjusted basis employing a 3-factor asset pricing model and Fama and Macbeth (1973) cross-sectional regression analyses. Our analyses reveal several critical findings: (1) both price and earnings momentum are effective for European firms, the effect being stronger for the UK than EU firms; (2) unlike U.S. REITs, price momentum seems to dominate drift for European firms; (3) there is weak evidence for positive interaction between drift and price momentum, contrary to the U.S. evidence; (4) the performance of momentum strategies depends on the state of the economy, while controlling for systematic factors; (5) idiosyncratic risk of real estate property firms may influence the returns on drift and momentum factors.

Keywords: Earnings momentum; Price momentum; REITs; Asset pricing; European real estate; Idiosyncratic risk (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s11146-017-9633-0

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