Idiosyncratic Momentum and the Importance of the Asset Pricing Model

45 Pages Posted: 15 Jul 2020

Date Written: June 22, 2020

Abstract

Using four different asset pricing models to estimate the residual returns, I show empirically that there are no material differences in the statistical and economic significance between idiosyncratic momentum strategies based on different asset-pricing models. I also show that idiosyncratic momentum is priced in the cross-section of returns, but spanned by a combination of risk factors when the combination includes price momentum. Despite being explained by common risk factors, the results suggest that idiosyncratic momentum is a stronger factor than price momentum and has a lower exposure to earnings momentum than price momentum.

Keywords: asset pricing, idiosyncratic momentum, momentum, stock-specific returns

JEL Classification: G11, G12, G14

Suggested Citation

Hovmark, Simon, Idiosyncratic Momentum and the Importance of the Asset Pricing Model (June 22, 2020). Available at SSRN: https://ssrn.com/abstract=3633108 or http://dx.doi.org/10.2139/ssrn.3633108

Simon Hovmark (Contact Author)

Aarhus University ( email )

Nordre Ringgade 1
DK-8000 Aarhus C, 8000
Denmark

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