Abstract

http://ssrn.com/abstract=903280
 
 

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Dynamic Factors and the Source of Momentum Profits


Tong Yao


University of Iowa - Henry B. Tippie College of Business

August 2006


Abstract:     
This paper uses the dynamic principal component method to estimate a dynamic factor model for stock returns and identify the source of momentum profits. We find that momentum is a systematic-return phenomenon - momentum profits are primarily due to stock return response to a small number of dynamic systematic factors, and the contribution by the idiosyncratic component of stock return is statistically insignificant. We also find that the estimated dynamic factors can be partially related to observed economic factors.

Number of Pages in PDF File: 43

Keywords: momentum, dynamic principal component

JEL Classification: G12

working papers series


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Date posted: May 19, 2006  

Suggested Citation

Yao, Tong, Dynamic Factors and the Source of Momentum Profits (August 2006). Available at SSRN: http://ssrn.com/abstract=903280 or http://dx.doi.org/10.2139/ssrn.903280

Contact Information

Tong Yao (Contact Author)
University of Iowa - Henry B. Tippie College of Business ( email )
108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
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