Market States and Momentum

Posted: 13 Oct 2003

See all articles by Roberto C. Gutierrez

Roberto C. Gutierrez

University of Oregon

Michael J. Cooper

University of Utah - David Eccles School of Business

Allaudeen Hameed

National University of Singapore (NUS) - Department of Finance

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Abstract

We test overreaction theories of short-run momentum and long-run reversal in the cross section of stock returns. Momentum profits depend on the state of the market, as predicted. From 1929 to 1995, the mean monthly momentum profit following positive market returns is 0.93 percent, whereas the mean profit following negative market returns is negative 0.37 percent. The up-market momentum reverses in the long-run. Our results are robust to the conditioning information in macroeconomic factors. Moreover, we find that macroeconomic factors are unable to explain momentum profits after simple methodological adjustments to take account of microstructure concerns.

Suggested Citation

Gutierrez, Roberto C. and Cooper, Michael J. and Hameed, Allaudeen, Market States and Momentum. Available at SSRN: https://ssrn.com/abstract=446482

Roberto C. Gutierrez (Contact Author)

University of Oregon ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States
541-346-3254 (Phone)
541-346-3341 (Fax)

Michael J. Cooper

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

Allaudeen Hameed

National University of Singapore (NUS) - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HOME PAGE: http://bizfaculty.nus.edu.sg/faculty-details/?profId=1

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