Macromomentum: Returns Predictability in International Equity Indices
AbstractThis study examines momentum and reversals in international stock market indices. We find that country stock indices exhibit momentum during the first year after the portfolio formation date and reversals during the subsequent 2 years. Positive currency momentum predicts low stock index returns in the future, thereby weakening momentum and strengthening reversals in U.S. dollar-denominated stock index returns. Cross-sectional regression tests involving individual stock indices confirm the portfolio findings. Our results are consistent with a key prediction of recent behavioral theories, that initial momentum should be accompanied by subsequent reversals.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 79 (2006)
Issue (Month): 1 (January)
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Web page: http://www.journals.uchicago.edu/JB/
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:CitEc Project, subscribe to its RSS feed for this item.
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- Thomas Nitschka, 2009. "Momentum in stock market returns, risk premia on foreign currencies and international financial integration," IEW - Working Papers 405, Institute for Empirical Research in Economics - University of Zurich.
- Wu, Yuliang & Li, Youwei, 2011. "Long-term return reversals--Value and growth or tax? UK evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(3), pages 347-368, July.
- Kim, Hyeongwoo, 2009. "On the usefulness of the contrarian strategy across national stock markets: A grid bootstrap analysis," Journal of Empirical Finance, Elsevier, vol. 16(5), pages 734-744, December.
- Karim M. Abadir & Gabriel Talmain, 2012. "Beyond Co-Integration: Modelling Co-Movements in Macro finance," Working Paper Series 25_12, The Rimini Centre for Economic Analysis.
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