Can Momentum Factors Be Used to Enhance Accounting Information Based Fundamental Analysis in Explaining Stock Price Movements?

40 Pages Posted: 6 Mar 2014

See all articles by KiHoon Jimmy Hong

KiHoon Jimmy Hong

Hongik University

Eliza Wu

The University of Sydney - Business School; Financial Research Network (FIRN)

Date Written: March 4, 2014

Abstract

This paper provides new empirical evidence that price-based momentum indicator variables can enhance the ability of accounting variables in explaining cross-sectional stock returns. We apply both OLS and state-space modelling to a sample of firms included in the Russell 3000 index over the period from 1999-2012 to compare the roles of the two main types of information typically used by equity investors. Empirical results reveal the importance of accounting variables over longer term horizons for particularly, small-cap stocks. Momentum variables are shown to be important in the shorter term horizons. This result remains robust to alternative methodologies used.

Keywords: Stock Returns, Fundamental Analysis, Momentum, State Space Model

JEL Classification: G12, G14

Suggested Citation

Hong, KiHoon Jimmy and Wu, Eliza, Can Momentum Factors Be Used to Enhance Accounting Information Based Fundamental Analysis in Explaining Stock Price Movements? (March 4, 2014). Available at SSRN: https://ssrn.com/abstract=2404651 or http://dx.doi.org/10.2139/ssrn.2404651

KiHoon Jimmy Hong (Contact Author)

Hongik University ( email )

Mapogu
94
Seoul, Seoul 121
Korea, Republic of (South Korea)

Eliza Wu

The University of Sydney - Business School ( email )

University of Sydney
Darlington
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

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

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

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