Macroeconomic Risk and Seasonality in Momentum Profits

41 Pages Posted: 1 Oct 2012 Last revised: 16 Dec 2017

See all articles by Susan Ji

Susan Ji

College of Business, Governors State University

J. Spencer Martin

University of Melbourne - Faculty of Business and Economics; Financial Research Network (FIRN)

Yaqiong (Chelsea) Yao

Lancaster University - Management School; New York University (NYU) - Leonard N. Stern School of Business

Date Written: January 30, 2017

Abstract

We contribute to the growing debate on the relation between macroeconomic risk and stock price momentum. Not only is momentum seasonal, so is its net factor exposure. We show that winners and losers only differ in macroeconomic factor loadings during January, the one month when losers overwhelmingly outperform winners. In the remainder of the year, when momentum does exist, winner and loser factor loadings offset nearly completely. Furthermore, the magnitude of macroeconomic risk premia appears to seasonally vary contra momentum. In contrast, the relatively new profitability factor does a much better job of capturing the described seasonality.

Keywords: Momentum; Macroeconomic risk; ROE; Seasonality; January effects

JEL Classification: G12; E44

Suggested Citation

Ji, Susan and Martin, J. Spencer and Yao, Yaqiong (Chelsea), Macroeconomic Risk and Seasonality in Momentum Profits (January 30, 2017). Journal of Financial Markets, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2154658 or http://dx.doi.org/10.2139/ssrn.2154658

Susan Ji

College of Business, Governors State University ( email )

University Park, IL 60484
United States

J. Spencer Martin (Contact Author)

University of Melbourne - Faculty of Business and Economics ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Yaqiong (Chelsea) Yao

Lancaster University - Management School ( email )

Department of Accounting and Finance
Lancaster University Management School
Lancaster, LA1 4YX
United Kingdom
+44 (0)1524 510731 (Phone)

New York University (NYU) - Leonard N. Stern School of Business ( email )

Stern School of Business
44 West 4th Street
New York, NY NY 10012
United States

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