| Published Papers |
| "Market States and Momentum", 2004, with Michael Cooper and Allaudeen Hameed, Journal of Finance 59, 1345-1365. [pdf]
Momentum profits depend on the state of the market, as predicted. From 1929 to 1995, the mean monthly momentum profit following positive market returns is 0.93 percent, whereas the mean profit following negative market returns is negative 0.37 percent. The up-market momentum reverses in the long-run. Our results are robust to the conditioning information in macroeconomic factors. Moreover, we find that macroeconomic factors are unable to explain momentum profits after simple methodological adjustments to take account of microstructure concerns "On the Predictability of Stock Returns in Real Time", 2005, with Michael Cooper and William Marcum, Journal of Business 78, 469-499. [pdf]
in this study whether the cross section of stock returns is predictable ex ante. We ask if a real-time investor could have used book-to-market equity, firm size, and one-year lagged returns to forecast stock returns during the 1974 to 1997 period. Using a recursive out-of sample method, we find that the market was difficult to beat in real time. Our findings suggest that the current notion of predictability in the literature is exaggerated. "Momentum, Reversal, and the Trading Behaviors of Institutions", 2007, with Christo Pirinsky, Journal of Financial Markets 10. [pdf]
specific abnormal returns, where abnormal is determined by a stock’s idiosyncratic return variation. Despite similar performances over the first year, these momentum portfolios perform dramatically differently beyond year one. Relative-return momentum reverses strongly; abnormal-return momentum continues for years. This complexity in return momentum challenges the current theories of momentum. We propose that both momenta are consequences of agency issues in the money management industry and provide empirical support for this economic rationale of momentum in returns. Incentives induce institutions to chase relative returns and to underreact to firm-specific abnormal returns. "The Long-Lasting Momentum in Weekly Returns", 2008, with Eric Kelley, Journal of Finance 63, 415-447. [pdf]
continuation in returns follows the well-documented brief reversal. These subsequent momentum profits are strong enough to offset the initial reversal and to produce a significant momentum effect over the full year following portfolio formation. Thus, ex post, extreme weekly returns are not too extreme. Our findings extend to weekly price movements with and without public news. In addition, there is no relation between news uncertainty and the momentum in one-week returns. |