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
Citation
DU, Qianqian; LIANG, Dawei; CHEN, Zilin; and TU, Jun.
Concept links and return momentum. (2022). Journal of Banking and Finance. 134, 1-13.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6827
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Internet Appendix
Additional URL
https://doi.org/10.1016/j.jbankfin.2021.106329