Download this Paper Open PDF in Browser

Momentum Strategies: Some Bootstrap Tests

Dice Center Working Paper No. 2003-6

41 Pages Posted: 8 Apr 2003  

George Andrew Karolyi

Cornell University - Johnson Graduate School of Management

Bong-Chan Kho

Seoul National University, Business School

Multiple version iconThere are 2 versions of this paper

Abstract

This study introduces a new estimation-based bootstrap simulation procedure to test whether different returns-generating models can explain the profitability of momentum strategies first documented in Jegadeesh and Titman (1993). We incorporate simple random walk and multifactor models and allow for autocorrelation, cross-correlation, conditional heteroscedasticity and predictability through conditioning information variables. We also evaluate alternative sampling procedures for the bootstrap simulations. None of the models, however, are able to generate simulated profits as large as the actual profits. We do find, however, that accounting for time-varying expected returns with market-wide and macroeconomic instrumental variables can explain 75 to 80 percent of the profits.

JEL Classification: G14, G12

Suggested Citation

Karolyi, George Andrew and Kho, Bong-Chan, Momentum Strategies: Some Bootstrap Tests. Dice Center Working Paper No. 2003-6. Available at SSRN: https://ssrn.com/abstract=392999 or http://dx.doi.org/10.2139/ssrn.392999

George Andrew Karolyi (Contact Author)

Cornell University - Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

Bong-Chan Kho

Seoul National University, Business School ( email )

607 LG Hall
1 Gwanak-ro, Gwanak-gu
Seoul, 08826
Korea, Republic of (South Korea)
+82-2-880-8798 (Phone)
+82-2-876-8411 (Fax)

Paper statistics

Downloads
415
Rank
57,825
Abstract Views
2,930