Overlapping Momentum Portfolios

65 Pages Posted: 7 Apr 2020 Last revised: 2 Jan 2022

Date Written: March 12, 2020


Different momentum investors use different formation periods to evaluate past stock performance. We show theoretically that the concurrence of trades from momentum investors with heterogeneous formation periods can enhance the autocorrelation of asset returns. Empirically, stocks in the intersection of the 6 and 12-month momentum portfolios--``overlapping'' momentum stocks--display superior medium-term returns than stocks that are not. This finding is robust to considering a broad set of risk factors and alternative explanations. In line with our theory, overlapping momentum stocks sustain high volume and their differential returns are higher among stocks with fast information diffusion. We confirm that focusing on overlapping momentum stocks improves the performance of a number of momentum-based strategies proposed in the literature.

Keywords: Momentum, Asset pricing, Market anomalies, Market efficiency

JEL Classification: G12, G14

Suggested Citation

Blanco, Iván and De Jesus, Miguel and Remesal, Alvaro, Overlapping Momentum Portfolios (March 12, 2020). Available at SSRN: https://ssrn.com/abstract= or http://dx.doi.org/10.2139/ssrn.3553765

Iván Blanco (Contact Author)

CUNEF ( email )

C/ Leonardo Prieto Castro, 2
Madrid, Madrid 28040

HOME PAGE: http://cunef.edu/

Miguel De Jesus

CUNEF University ( email )

Calle de Leonardo Prieto Castro, 2
Madrid, Madrid 28040
914480892 (Phone)
914480892 (Fax)

HOME PAGE: http://sites.google.com/site/miguelkarlodejesus/

Alvaro Remesal

CUNEF Universidad ( email )

Calle de los Pirineos 55
Madrid, 28040

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