Momentum profits: Fundamentals or time varying unsystematic risk

Houda BenMabrouk and Ismahen Souayeh
Authors registered in the RePEc Author Service: Houda Ben Mabrouk

International Journal of Finance & Economics, 2021, vol. 26, issue 1, 777-789

Abstract: This paper examines how fundamentals and time varying unsystematic risk can explore the origins of momentum strategies. Our data encompasses the monthly returns of listed stocks on the NASDAQ 100 index from 2002 to 2016. The results indicate that winners and losers are slanted towards small‐capitalization stocks with high systematic risk. Whereas only winners have growth and value the characteristics. Additionally, the results from the E‐GARCH‐M indicate that the speed of adjustment to volatility shocks is not the same for winners and losers. In fact, we find that the loser portfolios take a longer time to absorb the shocks and are more sensitive to bad than good Innovations. Finally, the results postulate that Momentum is significantly associated to time varying unsystematic risk, specifically for the (3/3) Strategy.

Date: 2021
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