The Long-Lasting Momentum in Weekly Returns
57 Pages Posted: 30 Oct 2006
Reversal is the current stylized fact of weekly returns. However, the brief reversal that follows extreme weekly returns is itself followed by an opposing and long-lasting stream of continuation in returns. These subsequent momentum profits are strong enough to offset the initial reversal and to produce a significant momentum effect over the full year following portfolio formation. Thus, ex post, extreme weekly returns are not too extreme. Our findings extend to weekly price movements with and without public news. In addition, there is no relation between news uncertainty and the momentum in one-week returns.
Keywords: weekly stock returns, momentum, reversal, news
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