International Price and Earnings Momentum

44 Pages Posted: 17 Mar 2008 Last revised: 17 Sep 2012

See all articles by Markus Leippold

Markus Leippold

University of Zurich; Swiss Finance Institute

Harald Lohre

Robeco Quantitative Investments; Lancaster University Management School

Multiple version iconThere are 2 versions of this paper

Date Written: January 14, 2009


We find that price and earnings momentum are pervasive features of international equity markets even when controlling for data snooping biases. For European countries, we find that price momentum is subsumed by earnings momentum on an aggregate level. However, this rationale does not apply to each and every country. While the above explanation is confined to certain time periods in the U.S., earnings momentum nevertheless appears to be a crucial driver of the price momentum anomaly in many markets. Since we cannot establish a decent relation between momentum and macroeconomic risks, we suspect a behavioral-based explanation to be at work. In fact, we find momentum profits to be more pronounced for portfolios characterized by higher information uncertainty. Hence, the momentum anomaly may well be rationalized in a model of investors underreacting to fundamental news. Finally, we find that momentum works better when limited to stocks with high idiosyncratic risk or higher illiquidity, suggesting that limits to arbitrage deter rational investors from exploiting the anomaly.

Keywords: Earnings Momentum, Price Momentum, Market Efficiency, Multiple Hypotheses Testing, Information Uncertainty, Liquidity

JEL Classification: G11, G12, G14, M40

Suggested Citation

Leippold, Markus and Lohre, Harald, International Price and Earnings Momentum (January 14, 2009). Available at SSRN: or

Markus Leippold

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4

Harald Lohre (Contact Author)

Robeco Quantitative Investments ( email )

Weena 850
Rotterdam, 3011 AG

Lancaster University Management School

Lancaster LA1 4YX
United Kingdom


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