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Macroeconomic risks, idiosyncratic risks and momentum profits Patterns in Neighboring Areas

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  • Sirajum Munira Sarwar
  • Gulnur Muradoglu

Abstract

This paper investigates the presence of momentum return when priced for risk factors. Using a sample period from 1926 through 2005 for all stocks listed in the NYSE, AMEX and NASDAQ we show that significant momentum return remains both at the portfolio level and at the individual stock level. We report positive and significant alpha of 0.009 when FamaeFrench three factors and macroeconomic risk factors are used at the portfolio level. At the individual stock level, though FamaeFrench factors cannot eliminate momentum return, the premium diminishes when macroeconomic variables are used. The result is more pronounced when lagged variables are used and during market upturn.

Suggested Citation

  • Sirajum Munira Sarwar & Gulnur Muradoglu, 2013. "Macroeconomic risks, idiosyncratic risks and momentum profits Patterns in Neighboring Areas," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 13(4), pages 99-114, December.
    • Handle: RePEc:bor:bistre:v:13:y:2013:i:4:p:99-114
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    Citations

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    Cited by:

    1. Mehdi Zolfaghari & Bahram Sahabi, 2021. "The impact of oil price and exchange rate on momentum strategy profits in stock market: evidence from oil-rich developing countries," Review of Managerial Science, Springer, vol. 15(7), pages 1981-2023, October.
    2. Li, Bob & Ee, Mong Shan & Rashid, Mamunur, 2016. "Is momentum trading profitable from Shari'ah compliant stocks?," Review of Financial Economics, Elsevier, vol. 31(C), pages 56-63.

    More about this item

    Keywords

    Momentum return; FamaeFrench factors; Macroeconomic risk factors; Portfolio level; Individual stock level;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G19 - Financial Economics - - General Financial Markets - - - Other

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