Abstract

http://ssrn.com/abstract=2182667
 
 

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Trend Factor: A New Determinant of Cross-Section Stock Returns


Yufeng Han


University of Colorado at Denver - Business School

Guofu Zhou


Washington University in St. Louis - Olin School of Business

April 2014


Abstract:     
We propose a trend factor capturing cross-section short-, intermediate- and long-term stock price trends. In contrast, the popular momentum factor relies on only one intermediate-term signal. The trend factor has an average return of 1.63% per month, more than twice that of the momentum factor and more than doubles the Sharpe ratio. In addition, during the recent financial crisis, it earns 0.79% per month while the momentum factor loses 1.33% per month. Moreover, its performance is robust to a variety of control variables and it explains the cross-section returns as well as or better than the momentum factor..

Number of Pages in PDF File: 54

Keywords: Trends, Factor Models, Momentum, Moving Averages, Predictability

JEL Classification: G11, G14

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Date posted: December 2, 2012 ; Last revised: May 1, 2014

Suggested Citation

Han, Yufeng and Zhou, Guofu, Trend Factor: A New Determinant of Cross-Section Stock Returns (April 2014). Available at SSRN: http://ssrn.com/abstract=2182667 or http://dx.doi.org/10.2139/ssrn.2182667

Contact Information

Yufeng Han
University of Colorado at Denver - Business School ( email )
1475 Lawrence St.
Denver, CO 80204
United States
303-3158458 (Phone)
Guofu Zhou (Contact Author)
Washington University in St. Louis - Olin School of Business ( email )
Washington University
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-6384 (Phone)
314-658-6359 (Fax)
HOME PAGE: http://apps.olin.wustl.edu/faculty/zhou/
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