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 language | English (US) |
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Pages (from-to) | 389-434 |
Number of pages | 46 |
Journal | Journal of Financial Economics |
Volume | 84 |
Issue number | 2 |
DOIs | |
State | Published - May 2007 |
Externally published | Yes |
Keywords
- Asset pricing
- Expected returns
- Momentum
- Real options
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics
- Strategy and Management