Publication Type

Working Paper

Version

publishedVersion

Publication Date

10-2019

Abstract

We document economically large momentum profits when sorting ETFs on returns over the past two to four years. A value-weighted, long-short strategy based on ETF momentum delivers Carhart (1997) four-factor alphas of up to 1.20% per month. Neither cross-sectional stock momentum nor co-variation with macroeconomic and liquidity risks can explain ETF momentum. Instead, the post-holding period returns are most consonant with the behavioral story of delayed overreaction. While ETF momentum survives multiple adjustments for transaction costs, it may be difficult to arbitrage as the profits are volatile and concentrated in ETFs with high idiosyncratic volatility or that hold low-analyst-coverage stocks.

Keywords

ETFs, Exchange traded funds, momentum, overreaction

Discipline

Finance and Financial Management

Research Areas

Finance

First Page

1

Last Page

51

Publisher

SSRN

External URL

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3468556

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