Firm-specific attributes and the cross-section of momentum

Jacob S. Sagi, Mark S. Seasholes

Research output: Contribution to journalArticle

141 Scopus citations

Abstract

This paper identifies observable firm-specific attributes that drive momentum. We find that a firm's revenues, costs, and growth options combine to determine the dynamics of its return autocorrelation. We use these insights to implement momentum strategies (buying winners and selling losers) with both numerically simulated returns and CRSP/Compustat data. In both sets of data, momentum strategies that use firms with high revenue growth volatility, low costs, or valuable growth options outperform traditional momentum strategies by approximately 5% per year.

Original languageEnglish (US)
Pages (from-to)389-434
Number of pages46
JournalJournal of Financial Economics
Volume84
Issue number2
DOIs
StatePublished - May 1 2007
Externally publishedYes

Keywords

  • Asset pricing
  • Expected returns
  • Momentum
  • Real options

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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