Momentum Profits, Factor Pricing, and Macroeconomic Risk

40 Pages Posted: 7 Nov 2007

See all articles by Laura Xiaolei Liu

Laura Xiaolei Liu

Guanghua School of Management, Peking University

Lu Zhang, 张橹

Ohio State University - Fisher College of Business; National Bureau of Economic Research (NBER)

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Abstract

Recent winners have temporarily higher loadings than recent losers on the growth rate of industrial production. The loading spread derives mostly from the positive loadings of winners. The growth rate of industrial production is a priced risk factor in standard asset pricing tests. In many specifications, this macroeconomic risk factor explains more than half of momentum profits. We conclude that risk plays an important role in driving momentum profits.

Keywords: Momentum, the growth rate of industrial production, macroeconomic risk, the expected-growth risk

JEL Classification: G12, E44

Suggested Citation

Liu, Laura Xiaolei and Zhang, Lu, Momentum Profits, Factor Pricing, and Macroeconomic Risk. Review of Financial Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1027214

Laura Xiaolei Liu

Guanghua School of Management, Peking University ( email )

Peking University
Beijing, Beijing 100871
China

HOME PAGE: http://www.pku.edu.lauraliu.cn/en-home.html

Lu Zhang (Contact Author)

Ohio State University - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
585-267-6250 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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