Size and Momentum Profitability in International Stock Markets

108 Pages Posted: 8 Sep 2015

See all articles by Peter Steffen Schmidt

Peter Steffen Schmidt

University of Zurich - Department of Banking and Finance; University of Geneva - Geneva Finance Research Institute (GFRI)

Andreas Schrimpf

Bank for International Settlements (BIS) - Monetary and Economic Department

Urs von Arx

ETH Zürich

Alexander F. Wagner

University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute

Andreas Ziegler

University of Kassel

Multiple version iconThere are 2 versions of this paper

Date Written: September 2015

Abstract

We study the link between the profitability of momentum strategies and firm size, drawing on an extensive dataset covering 23 stock markets across the globe. We first present evidence of an 'extreme' size premium in a large number of countries. These size premia, however, are most likely not realizable due to low stock market depth. We also show that international momentum profitability declines sharply with market capitalization. Momentum premiums are also considerably diminished by trading costs, when taking into account the actual portfolio turnover incurred when implementing this strategy. In contrast to strategies based on size, we find that momentum premia especially for medium-sized stocks still remain economically and statistically significant in most equity markets worldwide after adjusting for transaction costs.

Keywords: asset pricing anomalies, international equity markets, momentum, size, transaction costs

JEL Classification: C89, G12, G15

Suggested Citation

Schmidt, Peter Steffen and Schrimpf, Andreas and von Arx, Urs and Wagner, Alexander F. and Ziegler, Andreas, Size and Momentum Profitability in International Stock Markets (September 2015). CEPR Discussion Paper No. DP10804, Available at SSRN: https://ssrn.com/abstract=2657160

Peter Steffen Schmidt (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland

Andreas Schrimpf

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Urs Von Arx

ETH Zürich ( email )

Rämistrasse 101
ZUE F7
Zürich, 8092
Switzerland

Alexander F. Wagner

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Zürich, 8032
Switzerland
+41 44 634 3963 (Phone)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Swiss Finance Institute ( email )

Switzerland

HOME PAGE: http://www.alex-wagner.com

Andreas Ziegler

University of Kassel ( email )

Fachbereich 05
Nora-Platiel-Straße 1
34109 Kassel, Hessen 34127
Germany

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