Cross-Country Composite Momentum

72 Pages Posted: 23 Sep 2018 Last revised: 9 Nov 2020

See all articles by Birgit Müller

Birgit Müller

Darmstadt University of Technology

Sebastian Müller

Technische Universität München (TUM) - TUM School of Management

Date Written: August 29, 2018

Abstract

We demonstrate that firm-specific momentum profits are predictable across a wide range of international equity markets when combining information given in a multitude of stock characteristics. This predictor is comparatively simple to compute and can yield significant positive out-of-sample long-short portfolio returns. Cross-country analyses reveal that both, ordinary and composite-enhanced momentum returns tend to be higher within countries that exhibit less trading frictions and markets that exhibit less information opaqueness. Simultaneously, we find composite-enhanced momentum returns to be higher in highly individualistic countries that simultaneously exhibit smaller degrees of power distance. Overall, we interpret reported findings as empirical support for overreaction-based explanations of (composite-enhanced) momentum.

Keywords: momentum profits, stock characteristics, market efficiency, international stock markets

JEL Classification: G12, G14

Suggested Citation

Müller, Birgit and Müller, Sebastian, Cross-Country Composite Momentum (August 29, 2018). Available at SSRN: https://ssrn.com/abstract=3240609 or http://dx.doi.org/10.2139/ssrn.3240609

Birgit Müller (Contact Author)

Darmstadt University of Technology ( email )

Hochschulstraße 1
Darmstadt, Hesse D-64289
Germany

Sebastian Müller

Technische Universität München (TUM) - TUM School of Management ( email )

Germany

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