Separating Momentum from Reversal in International Stock Markets

Journal of Asset Management, Forthcoming

Posted: 13 Feb 2019

See all articles by Christian Walkshäusl

Christian Walkshäusl

University of Regensburg - Center of Finance

Florian Weißofner

University of Regensburg - Center of Finance

Ulrich Wessels

University of Regensburg - Center of Finance

Date Written: January 9, 2019

Abstract

Taking into account expected return characteristics like firm size and book-to-market in the selection of winners and losers helps to ex ante separate stocks with momentum from those that exhibit reversal in international equity markets. A strategy that buys small value winners and sells large growth losers generates significantly larger momentum profits than a standard momentum strategy, is robust to common return controls, and does not suffer from return reversals for holding periods up to three years. The superior performance of the strategy is attributable to a rather systematic exploitation of cross-sectional mispricing among momentum stocks.

Keywords: Momentum, Reversal, Return Predictability, Mispricing, International Markets

JEL Classification: G11, G12, G15

Suggested Citation

Walkshäusl, Christian and Weißofner, Florian and Wessels, Ulrich, Separating Momentum from Reversal in International Stock Markets (January 9, 2019). Journal of Asset Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3324231

Christian Walkshäusl (Contact Author)

University of Regensburg - Center of Finance ( email )

Regensburg
Germany

Florian Weißofner

University of Regensburg - Center of Finance ( email )

Regensburg
Germany

Ulrich Wessels

University of Regensburg - Center of Finance ( email )

Regensburg
Germany

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