Momentum Profits and Time-Varying Unsystematic Risk

29 Pages Posted: 26 Jun 2013

See all articles by Xiafei Li

Xiafei Li

Nottingham University Business School

Joëlle Miffre

Audencia Nantes School of Management; Audencia Business School

Chris Brooks

University of Reading - ICMA Centre

Niall O'Sullivan

University College Cork

Multiple version iconThere are 2 versions of this paper

Date Written: February 25, 2007

Abstract

This study assesses whether the widely documented momentum profits can be attributed to time-varying risk as described by a GJR-GARCH(1,1)-M model. We reveal that momentum profits are a compensation for time-varying unsystematic risks, which are common to the winner and loser stocks but affect the former more than the latter. In addition, we find that, perhaps because losers have a higher propensity than winners to disclose bad news, negative return shocks increase their volatility more than it increases those of the winners. The volatility of the losers is also found to respond to news more slowly, but eventually to a greater extent, than that of the winners.

Keywords: Momentum profits, Common unsystematic risk, GJR-GARCH(1,1)-M

JEL Classification: G12, G14

Suggested Citation

Li, Xiafei and Miffre, Joelle and Brooks, Chris and O'Sullivan, Niall, Momentum Profits and Time-Varying Unsystematic Risk (February 25, 2007). Journal of Banking and Finance, Vol. 32, No. 4, 2008. Available at SSRN: https://ssrn.com/abstract=2284822

Xiafei Li

Nottingham University Business School ( email )

Jubilee Campus
Nottingham, NG8 1BB
United Kingdom
+44 (0)115 9518603 (Phone)

Joelle Miffre

Audencia Nantes School of Management ( email )

8 route de la Jonelière, BP 31222
Nantes Cedex 3, Cedex 3 44312
France

Audencia Business School ( email )

8 Road Joneliere
BP 31222
Nantes Cedex 3, 44312
France

Chris Brooks (Contact Author)

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom
+44 118 931 82 39 (Phone)
+44 118 931 47 41 (Fax)

Niall O'Sullivan

University College Cork ( email )

Department of Economics
University College Cork
Cork, n/a
Ireland

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