Bad News Travels Slowly: Size, Analyst Coverage and the Profitability of Momentum Strategies

Harrison Hong, Terence Lim and Jeremy Stein

No 6553, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A number of theories have been proposed to explain the medium-term momentum in stock returns identified by Jegadeesh and Titman (1993). We test one such theory--based on the gradual-information-diffusion model of Hong and Stein (1997)--and establish three key results. First, once one moves past the very smallest stocks (where thin market-making capacity appears to be an issue) the profitability of momentum strategies declines sharply with firm size. Second, holding size fixed, momentum strategies work particularly well among stocks which have low analyst coverage. Finally, there is a strong asymmetry: the effect of analyst coverage is much more pronounced for stocks that are past losers than for stocks that are past winners. These findings are consistent with the hypothesis that firm-specific information only gradually across the investing public.

Date: 1998-05
Note: AP CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (59)

Published as Hong, Harrison, Terence Lim and Jeremy C. Stein. "Bad News Travels Slowly: Size, Analyst Coverage, And The Profitability Of Momentum Strategies," Journal of Finance, 2000, v55(1,Feb), 265-295.

Downloads: (external link)
http://www.nber.org/papers/w6553.pdf (application/pdf)

Related works:
Journal Article: Bad News Travels Slowly: Size, Analyst Coverage, and the Profitability of Momentum Strategies (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:6553

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w6553

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().