Momentum and Funding Conditions

56 Pages Posted: 4 Mar 2015 Last revised: 9 Feb 2016

See all articles by Luis García-Feijóo

Luis García-Feijóo

Florida Atlantic University - Department of Finance

Gerald Jensen

Creighton University

Tyler Jensen

Iowa State University - Ivy College of Business - Department of Finance

Date Written: August 1, 2015


We find strong evidence linking the momentum pattern in equity returns with a prominent measure of macroeconomic conditions, specifically the funding environment. We show that the size and consistency of the momentum premium varies systematically across funding states. Furthermore, we find evidence that the relationship between momentum returns and firm characteristics (documented in previous research) is conditional on the funding environment. After controlling for the funding state, we find that the importance of market states and return dispersion disappears. Additionally, funding conditions appear to contain incremental information about the momentum premium even after adjusting for the influence of market states and return dispersion. Overall our results are consistent with the conjecture that transitions in the funding environment encourage investors to revise their portfolio allocations; this reallocation produces inter-temporal variation in the momentum return pattern.

Keywords: Momentum, Funding Conditions, Asset Prices

Suggested Citation

Garcia-Feijoo, Luis and Jensen, Gerald and Jensen, Tyler, Momentum and Funding Conditions (August 1, 2015). Available at SSRN: or

Luis Garcia-Feijoo

Florida Atlantic University - Department of Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States
954-236-1239 (Phone)

Gerald Jensen

Creighton University ( email )

2500 California Plaza
Omaha, NE 68178
United States

Tyler Jensen (Contact Author)

Iowa State University - Ivy College of Business - Department of Finance ( email )

Ivy College of Business
3230 Gerdin Business Building
Ames, IA 50011-2063
United States

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