Journal of Mathematical Finance

Volume 4, Issue 3 (May 2014)

ISSN Print: 2162-2434   ISSN Online: 2162-2442

Google-based Impact Factor: 1.03  Citations  h5-index & Ranking

The Unexplainable Nature of Momentum Portfolio Returns

HTML  XML Download Download as PDF (Size: 414KB)  PP. 135-147  
DOI: 10.4236/jmf.2014.43013    4,727 Downloads   6,447 Views   Citations

ABSTRACT

We find that momentum portfolio returns are still unexplainable after addressing two major concerns in the “Investment Manifesto” of Lin and Zhang [1]: lack of economic basis in risk factor models and aggregate data measurement error. Our model represents a synthesis of the exchange economy model of Lucas and closed economy exogenous growth model of King and Rebelo. We mitigate data measurement error by utilizing firm-level financial data and production functions rather than macroeconomic data and utility functions. Although our results fail to completely explain momentum, they are consistent with the “Investment Manifesto” suggestion that firm-level market-to-book and productivity are important factors in describing returns.

Cite this paper

Moore, D. and Philippatos, G. (2014) The Unexplainable Nature of Momentum Portfolio Returns. Journal of Mathematical Finance, 4, 135-147. doi: 10.4236/jmf.2014.43013.

Copyright © 2020 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.