44 Pages Posted: 27 Apr 2022
Date Written: April 13, 2022
We use firm characteristics to estimate the enduring momentum probabilities for past winners (losers) to continue to be future winners (losers). The enduring momentum probability is significantly related to stock return persistence and explains cross-sectional expected returns. In addition, it contains different information from momentum signals. Combining the two pieces of information generates an enduring momentum strategy that produces a 2.19% return per month, almost doubling the momentum return. Factors that drive the price momentum strategy, such as seasonality, limit to arbitrage, and transaction costs, do not fully capture the performance of the enduring momentum strategy.
Keywords: Firm characteristics, enduring momentum probability, momentum
JEL Classification: C13, C31, C53, G17
Suggested Citation: Suggested Citation