Alternative reversal variable

Anh Duy Nguyen
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Anh Duy Nguyen: CleRMa - Clermont Recherche Management - ESC Clermont-Ferrand - École Supérieure de Commerce (ESC) - Clermont-Ferrand - UCA [2017-2020] - Université Clermont Auvergne [2017-2020]

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Abstract: In constructing the reversal variable, we tend to ignore the strong momentum in individual stock returns. A simple subtract the average of past 12-month return from previous month return allows us to alleviate the momentum return. Consequently, the reversals are significantly stronger. We also find that states of market have significant impact on reversal profit indirectly through momentum effect. In down market, when momentum effect appears weak, the profit of reversal strategy is significantly higher than in up market, when momentum effect is strong.

Keywords: anomalies; market states JEL classification: G12; Asset pricing models; short-term reversal; momentum (search for similar items in EconPapers)
Date: 2020
Note: View the original document on HAL open archive server: https://hal.science/hal-02388743
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Citations: View citations in EconPapers (2)

Published in Finance Research Letters, 2020, 33, pp.101227. ⟨10.1016/j.frl.2019.06.025⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02388743

DOI: 10.1016/j.frl.2019.06.025

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