Residual Momentum

60 Pages Posted: 4 Sep 2013

See all articles by David Blitz

David Blitz

Robeco Quantitative Investments

Joop Huij

Erasmus University - Rotterdam School of Management; Robeco; Erasmus University Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM)

Martin Martens

Robeco Asset Management

Multiple version iconThere are 2 versions of this paper

Date Written: August 1, 2009

Abstract

In this paper we examine a momentum strategy based on residual stock returns. We find that residual momentum exhibits risk-adjusted profits that are about twice as large as those associated with total return momentum. Moreover, we find that the main arguments that have been put forward in the academic literature to rationalize momentum are unsuccessful in explaining residual momentum. Our results have important implications for the theoretical debate on market efficiency as well as the practical implementation of momentum trading strategies.

Keywords: momentum, time-varying risk, stock-specific returns, residual returns

JEL Classification: G11, G12, G14

Suggested Citation

Blitz, David and Huij, Joop and Martens, Martin P.E., Residual Momentum (August 1, 2009). Available at SSRN: https://ssrn.com/abstract=2319861 or http://dx.doi.org/10.2139/ssrn.2319861

David Blitz

Robeco Quantitative Investments ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

Joop Huij (Contact Author)

Erasmus University - Rotterdam School of Management ( email )

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands

HOME PAGE: http://www.rsm.nl/jhuij

Robeco

Rotterdam, 3014DA
Netherlands

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

Erasmus University Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands

Martin P.E. Martens

Robeco Asset Management ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

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