Momentum profits and time-varying unsystematic risk

Xiafei Li; Joëlle Miffre; Chris Brooks; Niall O'Sullivan

doi:10.1016/j.jbankfin.2007.03.014

Momentum profits and time-varying unsystematic risk

Xiafei Li
, Joëlle Miffre
, Chris Brooks
, Niall O'Sullivan

Cork University Business School

City University
EDHEC Business School
University of Reading

Research output: Contribution to journal › Article › peer-review

Abstract

This study assesses whether the widely documented momentum profits can be attributed to time-varying risk as described by a GJR-GARCH(1,1)-M model. We reveal that momentum profits are a compensation for time-varying unsystematic risks, which are common to the winner and loser stocks but affect the former more than the latter. In addition, we find that, perhaps because losers have a higher propensity than winners to disclose bad news, negative return shocks increase their volatility more than they increase those of the winners. The volatility of the losers is also found to respond to news more slowly, but eventually to a greater extent, than that of the winners.

Original language	English
Pages (from-to)	541-558
Number of pages	18
Journal	Journal of Banking and Finance
Volume	32
Issue number	4
DOIs	https://doi.org/10.1016/j.jbankfin.2007.03.014
Publication status	Published - Apr 2008

Keywords

GJR-GARCH(1,1)-M model
Momentum profits
Unsystematic risk

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10.1016/j.jbankfin.2007.03.014

https://hdl.handle.net/10468/1271Licence: CC BY-NC-ND

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title = "Momentum profits and time-varying unsystematic risk",

abstract = "This study assesses whether the widely documented momentum profits can be attributed to time-varying risk as described by a GJR-GARCH(1,1)-M model. We reveal that momentum profits are a compensation for time-varying unsystematic risks, which are common to the winner and loser stocks but affect the former more than the latter. In addition, we find that, perhaps because losers have a higher propensity than winners to disclose bad news, negative return shocks increase their volatility more than they increase those of the winners. The volatility of the losers is also found to respond to news more slowly, but eventually to a greater extent, than that of the winners.",

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AU - Miffre, Joëlle

AU - Brooks, Chris

AU - O'Sullivan, Niall

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N2 - This study assesses whether the widely documented momentum profits can be attributed to time-varying risk as described by a GJR-GARCH(1,1)-M model. We reveal that momentum profits are a compensation for time-varying unsystematic risks, which are common to the winner and loser stocks but affect the former more than the latter. In addition, we find that, perhaps because losers have a higher propensity than winners to disclose bad news, negative return shocks increase their volatility more than they increase those of the winners. The volatility of the losers is also found to respond to news more slowly, but eventually to a greater extent, than that of the winners.

AB - This study assesses whether the widely documented momentum profits can be attributed to time-varying risk as described by a GJR-GARCH(1,1)-M model. We reveal that momentum profits are a compensation for time-varying unsystematic risks, which are common to the winner and loser stocks but affect the former more than the latter. In addition, we find that, perhaps because losers have a higher propensity than winners to disclose bad news, negative return shocks increase their volatility more than they increase those of the winners. The volatility of the losers is also found to respond to news more slowly, but eventually to a greater extent, than that of the winners.

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KW - Unsystematic risk

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JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

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ER -

Momentum profits and time-varying unsystematic risk

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Keywords

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