Global Momentum Strategies: A Portfolio Perspective
34 Pages Posted: 4 Feb 2004
Date Written: July 15, 2004
We provide practical perspectives on momentum investing in stocks internationally. First, momentum is generally more profitable on the long side than on the short side, making it accessible to a broad range of institutional capital. Second, both price and earnings momentum profits are significant globally. Third, internationally, earnings momentum is distinct from price momentum, and using price and earnings momentum in conjunction produces larger economic profits. Fourth, momentum profits have weaker co-movements across markets than market indices. Interestingly, while market correlations are much higher in down markets than in up markets, momentum correlations are low in both market conditions. Fifth, momentum strategies do not differ appreciably in profitability between up and down markets, which means timing is less important to momentum traders. Finally, momentum strategies are not riskless-historically there have often occurred periods of several months where they have netted low or negative returns. Altogether, these findings suggest that momentum is useful in international portfolio management, but its implementation should be thoughtfully considered.
Keywords: Momentum, Portfolio Management
JEL Classification: G12, G14, G15
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
By Nicholas Barberis, Andrei Shleifer, ...
A Unified Theory of Underreaction, Momentum Trading and Overreaction in Asset Markets
By Harrison G. Hong and Jeremy C. Stein
By Louis K.c. Chan, Narasimhan Jegadeesh, ...
Bad News Travels Slowly: Size, Analyst Coverage and the Profitability of Momentum Strategies
By Harrison G. Hong, Terence Lim, ...
Price Momentum and Trading Volume
Mean Reversion in Stock Prices: Evidence and Implications
International Momentum Strategies
Profitability of Momentum Strategies: An Evaluation of Alternative Explanations
Profitability of Momentum Strategies: an Evaluation of Alternative Explanations
When are Contrarian Profits Due to Stock Market Overreaction?
By Andrew W. Lo and A. Craig Mackinlay