Momentum and Credit Rating
Hebrew University of Jerusalem
Emory University - Department of Finance
George Washington University - Department of Finance
George Mason University - Finance Area
March 1, 2006
This paper establishes a robust link between momentum and credit rating. Momentum profitability is large and significant among low-grade firms, but it is nonexistent among high-grade firms. The momentum payoffs documented in the literature are generated by low-grade firms that account for less than 4% of the overall market capitalization of rated firms. The momentum payoff differential across credit rating groups is unexplained by firm size, firm age, analyst forecast dispersion, leverage, return volatility, and cash flow volatility.
Number of Pages in PDF File: 28
Keywords: momentum, credit risk, credit rating
JEL Classification: G11, G12, G14working papers series
Date posted: June 9, 2005
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