Objective research to aid investing decisions

Value Investing Strategy (Strategy Overview)

Allocations for June 2024 (Final)

Momentum Investing Strategy (Strategy Overview)

Allocations for June 2024 (Final)
1st ETF 2nd ETF 3rd ETF

Momentum and Reversal Drivers for Large U.S. Stocks

July 28, 2021 • Posted in Momentum Investing

What drives 12-month (with skip-month) momentum and 1-month reversal effects among U.S. common stock returns?  In their July 2021 paper entitled “Mapping out Momentum”, Yimou Li and David Turkington decompose momentum and reversal effects into distinct industry/sector, factor (size, value, profitability, investment) and stock-specific contributions. In addition to full-sample results, they look at:

  • High and low volatility states, as defined by a threshold of 25 for average daily CBOE Volatility Index (VIX) during the month of stock return measurement.
  • Contributions of past winners versus past losers.
  • Two subsamples with breakpoint December 2009.

They focus on S&P 500 stocks to avoid concerns that any anomalies are due to market frictions or are not exploitable on a large scale. They assume a 3-day implementation lag in computing next-month returns. They examine statistical significance (t-statistic) rather than magnitude of anomaly returns. Using S&P 500 stock, sector/industry and factor data and daily VIX levels during January 1995 through December 2020, they find that:


Please or subscribe to continue reading...
Gain access to hundreds of premium articles, our momentum strategy, full RSS feeds, and more!  Learn more

Daily Email Updates