Publication Type
Working Paper
Version
publishedVersion
Publication Date
8-2017
Abstract
Using both the levels and the time-series trends of a collection of firms' major fundamentals, we find that fundamentals matter after all: they can also generate strong return momentum. A fundamental momentum strategy that goes long stocks with fundamental in the top quintile and short stocks with fundamental in the bottom quintile earns a monthly average return of 88 bps, and is comparable with the popular price momentum but has little correlation. Combining price momentum and fundamental momentum yields a twin momentum, which has an average return more than the sum of both price momentum and fundamental momentum. Twin momentum cannot be spanned by extant risk factor models, nor can it be explained by short-sale impediments and investor sentiment.
Keywords
Price Momentum, Fundamental Momentum, Twin Momentum
Discipline
Finance | Finance and Financial Management
Research Areas
Finance
First Page
1
Last Page
49
Publisher
SSRN
Citation
HUANG, Dashan; ZHANG, Huacheng; and ZHOU, Guofu.
Twin momentum: Fundamental trends matter. (2017). 1-49.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/5157
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://ssrn.com/abstract=2894068