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Alpha Momentum and Price Momentum

43 Pages Posted: 2 Jul 2013 Last revised: 8 Mar 2017

Hannah Lea Hühn

Assenagon Asset Management

Hendrik Scholz

Friedrich-Alexander-Universität (FAU) Erlangen-Nürnberg

Date Written: March 6, 2017

Abstract

We analyze a novel alpha momentum strategy that invests in stocks based on three-factor alphas which we estimate using daily returns. The empirical analysis for the U.S. and for Europe shows that i) past alpha has power in predicting the cross-section of stock returns, ii) alpha momentum exhibits less dynamic factor exposures than price momentum and iii) alpha momentum dominates price momentum only in the U.S. Connecting both strategies to behavioral explanations, alpha momentum is more related to an underreaction to firm-specific news while price momentum is primarily driven by price overshooting due to momentum trading.

Keywords: Alpha momentum; price momentum; stock-specific return; price overshooting; slow information diffusion; reversal

JEL Classification: G11, G12, G14

Suggested Citation

Hühn, Hannah Lea and Scholz, Hendrik, Alpha Momentum and Price Momentum (March 6, 2017). Available at SSRN: https://ssrn.com/abstract=2287848 or http://dx.doi.org/10.2139/ssrn.2287848

Hannah Lea Hühn (Contact Author)

Assenagon Asset Management ( email )

Prannerstraße 8
München, Bavaria 80333
Germany
+49 89 519966 423 (Phone)
+49 89 519966 55423 (Fax)

HOME PAGE: http://www.assenagon.com

Hendrik Scholz

Friedrich-Alexander-Universität (FAU) Erlangen-Nürnberg ( email )

Finance and Banking
Lange Gasse 20
Nürnberg, Bavaria 90403
Germany
0049-911-5302649 (Phone)
0049-911-5302466 (Fax)

HOME PAGE: http://www.finanzierung.wiso.uni-erlangen.de

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