Predicted Returns and Sources of Momentum Profits
Predictive regressions with macroeconomic predictors characterize reduced-form linear asset pricing models. We exploit the economic and statistical properties of predictive regressions to search for source of momentum profits. The predictive intercept and hence the predicted returns contain both a stock-specific component and a common-factor-related component. With a conditional two-tier sorting we document that both the predictive intercept and the macroeconomic-predictor-related part of predicted returns contribute to the momentum profits. By applying cross-sectional pricing-power tests to the momentum payo_s due to the predictive intercept, we find that such momentum payo_s are closely related to the predicted returns stock-specific component. Further, we report that about 50％ of winner/loser stocks a_liated with the raw-return-based momentum strategy are also winner/loser stocks of the conditional momentum strategies based primarily on either the macroeconomy-related part or the predictive intercept of predicted returns.
Momentum predictive regressions time-varying risk premium stock-specific component
Qiang Kang Canlin Li
University of Miami University of California-Riverside
国际会议
成都
英文
2007-07-09（万方平台首次上网日期，不代表论文的发表时间）