Abstract

https://ssrn.com/abstract=2679656
 


 



Cross-Sectional Factor Dynamics and Momentum Returns


Doron Avramov


Hebrew University of Jerusalem - Jerusalem School of Business Administration

Satadru Hore


Federal Reserve Bank of Boston

August 8, 2016


Abstract:     
We develop a structural model where joint dynamics of aggregate consumption and asset-specific dividends are governed by correlated state-variables. The correlation structure implies distinct cross-sectional exposures of dividends to long history of consumption growth rates, resulting in variation of consumption beta. Such variation rationalizes momentum crashes per Daniel and Moskowitz (2015), as Winner's consumption beta remains low after the economy recovers from a downturn, while Loser's consumption beta grows quickly. Emerging from a recession, the momentum strategy thus reduces in consumption beta and risk-premia. Variation in beta also explains tendency of momentum to concentrate in stocks with particular styles.

Number of Pages in PDF File: 65

Keywords: Momentum, Cross-Sectional Dynamics, Long-Run Risk, Bayesian Filtering

JEL Classification: G12, C32


Open PDF in Browser Download This Paper

Date posted: October 27, 2015 ; Last revised: August 9, 2016

Suggested Citation

Avramov, Doron and Hore, Satadru, Cross-Sectional Factor Dynamics and Momentum Returns (August 8, 2016). Available at SSRN: https://ssrn.com/abstract=2679656 or http://dx.doi.org/10.2139/ssrn.2679656

Contact Information

Doron Avramov
Hebrew University of Jerusalem - Jerusalem School of Business Administration ( email )
Mount Scopus
Jerusalem, 91905
Israel
HOME PAGE: http://pluto.huji.ac.il/~davramov/
Satadru Hore (Contact Author)
Federal Reserve Bank of Boston ( email )
600 Atlantic Avenue
Boston, MA 02116
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,102
Downloads: 192
Download Rank: 123,391