The momentum life cycle (MLC) hypothesis first proposed by Lee and Swaminathan (2000) applies also to global markets. Early-stage strategies significantly outperform the late-stage and conventional strategies in most countries. Individualism culture is positively associated with late-stage but unrelated to early-stage momentum profitability, suggesting that early- and late-stage momentums are driven by different underlying mechanisms. Consistent with Stein’s (2009) model that arbitrageurs could amplify mispricing, we find that late-stage momentum profits are more pronounced in countries with lower limits to arbitrage. Furthermore, we find that the MLC also applies to exchange traded funds in the United States.
Momentum life cycle, International, ETFs, Individualism, Limits to arbitrag, Momentum profits
Corporate Finance | Finance and Financial Management
Asian Finance Association (AsianFA) 2015 Conference Paper
City or Country
Hong Kong University of Science and Technology, University of Queensland
LI, Frank Weikai and WEI, K. C. John.
Momentum life cycle around the world. (2015). Asian Finance Association (AsianFA) 2015 Conference Paper. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/5297
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