40 Pages Posted: 20 Sep 2010 Last revised: 9 Apr 2012
Date Written: February 11, 2011
The answer to the title question is "Yes." Examining stocks traded on the NYSE, AMEX and NASDAQ for the period of 1964 to 2009, this study discovers that, while momentum prevails among small stocks, momentum and reversals coexist among large stocks for a holding period of up to six months. The momentum/reversal divide is along the volatility dimension: Large-cap/low-volatility stocks exhibit reversals while large-cap/high-volatility stocks experience momentum. This new discovery cannot be fully rationalized with either risk-based or behavioral-based explanations.
Keywords: momentum, reversals, return predictability, firm size, volatility, underreaction, overreaction
JEL Classification: G10, G12, G14
Suggested Citation: Suggested Citation
By Meb Faber