Do Style and Sector Indexes Carry Momentum?

The Journal of Investment Strategies, vol1(3), Summer 2012, 67-89.

29 Pages Posted: 1 Sep 2012 Last revised: 7 Sep 2012

See all articles by Linda H. Chen

Linda H. Chen

University of Idaho

George J. Jiang

Washington State University

Xingnong Zhu

Ibbotson Associates

Date Written: August 28, 2011

Abstract

Existing literature documents that cross-sectional stock returns exhibit both price momentum and earnings momentum. In this paper, we examine whether commonly used style and sector indexes also have momentum patterns. We show that style indexes exhibit strong price momentum, but little evidence of earnings momentum. On the other hand, sector indexes exhibit both significant price momentum and earnings momentum. Moreover, we provide evidence that price momentum in style indexes can be explained by individual stock return momentum, whereas price momentum in sector indexes is driven by earnings momentum. Finally, we show that a dynamic momentum strategy can further enhance the performance of style investment even after adjusting for transaction costs.

Keywords: Style Indexes, Sector Indexes, Price Momentum, Earnings Momentum, Transaction Costs

JEL Classification: G10, G11, G14

Suggested Citation

Chen, Linda H. and Jiang, George and Zhu, Xingnong, Do Style and Sector Indexes Carry Momentum? (August 28, 2011). The Journal of Investment Strategies, vol1(3), Summer 2012, 67-89., Available at SSRN: https://ssrn.com/abstract=2139210 or http://dx.doi.org/10.2139/ssrn.2139210

Linda H. Chen

University of Idaho ( email )

Department of Accounting
College of Business and Economics
Moscow, ID 83944-3174
United States

George Jiang (Contact Author)

Washington State University ( email )

Department of Finance and Management Science
Carson College of Business
Pullman, WA 99-4746164
United States
509-3354474 (Phone)

HOME PAGE: http://directory.business.wsu.edu/bio.html?username=george.jiang

Xingnong Zhu

Ibbotson Associates ( email )

225 North Michigan Avenue
Suite 700
Chicago, IL 60601
United States

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