Do Countries or Industries Explain Momentum in Europe?

Posted: 19 Dec 2005

See all articles by Theo Nijman

Theo Nijman

Tilburg University - Tilburg University School of Economics and Management

Marno Verbeek

Erasmus University - Rotterdam School of Management; Erasmus Research Institute of Management (ERIM); Netspar

Laurens Swinkels

Erasmus University Rotterdam (EUR); Robeco Quantitative Investments

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Abstract

This paper investigates the question whether individual stock momentum in Europe is subsumed by country or industry momentum. We introduce a portfolio-based regression approach, which directly allows to test hypotheses about the existence and relative importance of multiple effects (e.g., momentum, value, and size), even when only a moderate number of stocks are available. Our results suggest that the positive expected excess returns of momentum strategies in European stock markets are primarily driven by individual stock effects, while industry momentum plays a less important role and country momentum is even weaker. These results are robust to the inclusion of value and size effects.

Keywords: country risk, industry risk, momentum effect, portfolio selection

JEL Classification: G11, G14, G15

Suggested Citation

Nijman, Theo E. and Verbeek, Marno and Swinkels, Laurens, Do Countries or Industries Explain Momentum in Europe?. Journal of Empirical Finance, Vol. 11, pp. 461-481, 2004, Available at SSRN: https://ssrn.com/abstract=871041

Theo E. Nijman

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2342 (Phone)
+31 13 466 3280 (Fax)

Marno Verbeek

Erasmus University - Rotterdam School of Management ( email )

P.O. Box 1738
Room T09-53
3000 DR Rotterdam
Netherlands
+31 10 408 2790 (Phone)

HOME PAGE: http://www.rsm.nl/mverbeek

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Laurens Swinkels (Contact Author)

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Robeco Quantitative Investments ( email )

Rotterdam, 3000
Netherlands
+31 10 224 2470 (Phone)
+31 10 224 2110 (Fax)

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