Abstract

http://ssrn.com/abstract=392999
 
 

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Momentum Strategies: Some Bootstrap Tests


George Andrew Karolyi


Cornell University - Johnson Graduate School of Management

Bong-Chan Kho


Seoul National University, Business School


Dice Center Working Paper No. 2003-6

Abstract:     
This study introduces a new estimation-based bootstrap simulation procedure to test whether different returns-generating models can explain the profitability of momentum strategies first documented in Jegadeesh and Titman (1993). We incorporate simple random walk and multifactor models and allow for autocorrelation, cross-correlation, conditional heteroscedasticity and predictability through conditioning information variables. We also evaluate alternative sampling procedures for the bootstrap simulations. None of the models, however, are able to generate simulated profits as large as the actual profits. We do find, however, that accounting for time-varying expected returns with market-wide and macroeconomic instrumental variables can explain 75 to 80 percent of the profits.

Number of Pages in PDF File: 41

JEL Classification: G14, G12

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Date posted: April 8, 2003  

Suggested Citation

Karolyi, George Andrew and Kho, Bong-Chan, Momentum Strategies: Some Bootstrap Tests. Dice Center Working Paper No. 2003-6. Available at SSRN: http://ssrn.com/abstract=392999 or http://dx.doi.org/10.2139/ssrn.392999

Contact Information

George Andrew Karolyi (Contact Author)
Cornell University - Johnson Graduate School of Management ( email )
Ithaca, NY 14853
United States
Bong-Chan Kho
Seoul National University, Business School ( email )
607 LG Hall
599 Kwanak-ro, Kwanak-gu
Seoul, 151-916
Korea, Republic of (South Korea)
+82-2-880-8798 (Phone)
+82-2-876-8411 (Fax)
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