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Momentum and Credit Rating

Author

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  • DORON AVRAMOV
  • TARUN CHORDIA
  • GERGANA JOSTOVA
  • ALEXANDER PHILIPOV

Abstract

This paper establishes a robust link between momentum and credit rating. Momentum profitability is large and significant among low‐grade firms, but it is nonexistent among high‐grade firms. The momentum payoffs documented in the literature are generated by low‐grade firms that account for less than 4% of the overall market capitalization of rated firms. The momentum payoff differential across credit rating groups is unexplained by firm size, firm age, analyst forecast dispersion, leverage, return volatility, and cash flow volatility.

Suggested Citation

  • Doron Avramov & Tarun Chordia & Gergana Jostova & Alexander Philipov, 2007. "Momentum and Credit Rating," Journal of Finance, American Finance Association, vol. 62(5), pages 2503-2520, October.
    • Handle: RePEc:bla:jfinan:v:62:y:2007:i:5:p:2503-2520
    DOI: 10.1111/j.1540-6261.2007.01282.x
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