Momentum Profits, Market Cycles, and Rebounds: Evidence from Germany

56 Pages Posted: 2 Nov 2013 Last revised: 31 Jul 2016

See all articles by Martin T. Bohl

Martin T. Bohl

University of Muenster

Marc-Gregor Czaja

Allianz Investment Management

Philipp Kaufmann

University of Muenster

Date Written: May 25, 2015


Recent evidence shows that U.S. price momentum strategies suffer tremendous losses in times of highly volatile market recoveries. We extend the existing literature by analyzing the performance of both price and earnings momentum portfolios across different market states. For our German sample, we find that the long-short price momentum strategy loses almost 9% per month during market rebounds. This so-called momentum crash is solely due to recovering loser stocks. After a prolonged bear market hits bottom, the loser portfolio is mostly composed of highly volatile and leveraged small-cap stocks, which have lost nearly 83% of their market value over the preceding year and are thus susceptible to heavy rebounds. Interestingly, the momentum crash phenomenon seems to disappear once we control for exposures to the Fama-French factors, with the market factor being the most relevant. By contrast, earnings momentum strategies are less affected by market rebounds and also consistently outperform price momentum strategies on a risk-adjusted basis.

Keywords: Price and Earnings Momentum, Bull and Bear Markets, Market Rebounds, Momentum Crashes, Time-Varying Performance Measurement

JEL Classification: G11, G12, G14

Suggested Citation

Bohl, Martin T. and Czaja, Marc-Gregor and Kaufmann, Philipp, Momentum Profits, Market Cycles, and Rebounds: Evidence from Germany (May 25, 2015). Quarterly Review of Economics and Finance, Vol. 61, 2016, Available at SSRN: or

Martin T. Bohl

University of Muenster ( email )

Schlossplatz 2
D-48149 Muenster, D-48149

Marc-Gregor Czaja

Allianz Investment Management ( email )

Reinsburgstr. 19
Stuttgart, 70178
+49-711-663-2122 (Phone)
+49-711-663-82122 (Fax)


Philipp Kaufmann (Contact Author)

University of Muenster ( email )

Am Stadtgraben 9
Muenster, D-48143
+49 (0)251 - 83 22 846 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
PlumX Metrics