Publication Type

Journal Article

Version

acceptedVersion

Publication Date

1-2022

Abstract

Unlike traditional asset categories (e.g., industry classifications) that are generally defined clearly, some groups of stocks are tied to certain loosely defined “concepts” (e.g., e-commerce). When investors find it difficult to analyze ambiguous concept-oriented information, information diffuses slowly, creating “concept momentum”. Based on unique concept data in the Chinese stock market, this study constructs a concept-momentum strategy that involves buying stocks from past winning concepts and selling stocks from past losing concepts, which can generate pronounced abnormal returns. Neither risk factors, firm-level momentum, nor industry-level momentum can explain concept momentum. Furthermore, we find that both the underreaction and cross-stock lead-lag effect channels can cause slow information diffusion and drive concept momentum. Moreover, the concept momentum effect is stronger for relatively ambiguous concepts, for concepts that attract less investor attention, and following high-sentiment periods.

Keywords

Asset classifications, Category learning, Concept stocks, Momentum effects

Discipline

Finance and Financial Management | Portfolio and Security Analysis

Research Areas

Finance

Publication

Journal of Banking and Finance

Volume

134

First Page

1

Last Page

13

ISSN

0378-4266

Identifier

10.1016/j.jbankfin.2021.106329

Publisher

Elsevier

Embargo Period

4-28-2023

Copyright Owner and License

Authors

ConceptLinksRetureMomentum-suppl.pdf (267 kB)
Internet Appendix

Additional URL

https://doi.org/10.1016/j.jbankfin.2021.106329

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