Momentum and Credit Rating

Avramov, Doron; Chordia, Tarun; Jostova, Gergana; Philipov, Alexander

doi:10.2139/ssrn.739324

Momentum and Credit Rating

28 Pages Posted: 9 Jun 2005

Doron Avramov

Interdisciplinary Center (IDC) Herzliyah

Tarun Chordia

Emory University - Department of Finance

Gergana Jostova

George Washington University - Department of Finance

Alexander Philipov

George Mason University - Department of Finance

There are 2 versions of this paper

Date Written: March 1, 2006

Abstract

This paper establishes a robust link between momentum and credit rating. Momentum profitability is large and significant among low-grade firms, but it is nonexistent among high-grade firms. The momentum payoffs documented in the literature are generated by low-grade firms that account for less than 4% of the overall market capitalization of rated firms. The momentum payoff differential across credit rating groups is unexplained by firm size, firm age, analyst forecast dispersion, leverage, return volatility, and cash flow volatility.

Keywords: momentum, credit risk, credit rating

JEL Classification: G11, G12, G14

Suggested Citation: Suggested Citation

Avramov, Doron and Chordia, Tarun and Jostova, Gergana and Philipov, Alexander, Momentum and Credit Rating (March 1, 2006). Available at SSRN: https://ssrn.com/abstract=739324 or http://dx.doi.org/10.2139/ssrn.739324