Do Countries or Industries Explain Momentum in Europe?

ERIM Report Series Reference No. ERS-2002-91-F&A

EFA 2002 Berlin Meetings Presented Paper

45 Pages Posted: 1 Mar 2002

See all articles by Theo Nijman

Theo Nijman

Tilburg University - Tilburg University School of Economics and Management

Marno Verbeek

Erasmus University - Rotterdam School of Management; Erasmus Research Institute of Management (ERIM); Netspar

Laurens Swinkels

Erasmus University Rotterdam (EUR); Robeco Quantitative Investments

Multiple version iconThere are 2 versions of this paper

Date Written: 28 2002, 10

Abstract

The driving force behind the well-documented medium term momentumeffect in stock returns is subject of much debate. Empirical papersthat aim to find the determinants of this return continuation, seem tobe almost exclusively restricted to US stock markets. Consequently,regional effects have received little attention in these analyses.This paper contributes to the discussion by investigating the presenceof country and industry momentum in Europe and addressing the questionwhether individual stock momentum is subsumed by country or industrymomentum.We examine these issues by introducing a portfolio-basedregression approach, which allows to test hypotheses about theexistence and relative importance of multiple effects using standardstatistical techniques. While the traditional sorting techniques arenot suited to disentangle a multitude of possibly interrelated effects(e.g. momentum, value, and size), our method can be used even whenonly a moderate number of stocks are available. Our results suggestthat the positive expected excess returns of momentum strategies inEuropean stock markets are primarily driven by individual stockseffects, while industry momentum plays a less important role andcountry momentum is even weaker. These results are robust to theinclusion of value and size effects.

Keywords: country risk, industry risk, momentum effect, portfolio selection, technology adoption

JEL Classification: M, M41, G3, G11, G14, G15

Suggested Citation

Nijman, Theo E. and Verbeek, Marno and Swinkels, Laurens, Do Countries or Industries Explain Momentum in Europe? (28 2002, 10). ERIM Report Series Reference No. ERS-2002-91-F&A, EFA 2002 Berlin Meetings Presented Paper, Available at SSRN: https://ssrn.com/abstract=301533 or http://dx.doi.org/10.2139/ssrn.301533

Theo E. Nijman

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2342 (Phone)
+31 13 466 3280 (Fax)

Marno Verbeek (Contact Author)

Erasmus University - Rotterdam School of Management ( email )

P.O. Box 1738
Room T09-53
3000 DR Rotterdam
Netherlands
+31 10 408 2790 (Phone)

HOME PAGE: http://www.rsm.nl/mverbeek

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Laurens Swinkels

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Robeco Quantitative Investments ( email )

Rotterdam, 3000
Netherlands
+31 10 224 2470 (Phone)
+31 10 224 2110 (Fax)

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